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Policy rates steady for this month

Jun 16, 2010 5:28:15 AM - itnnews.lk

Sri Lanka is holding its main policy rate at which money is injected to the economy steady with inflation falling and credit to businesses expanding.

The Central Bank said inflation fell for the third consecutive month, reaching 5.3 percent in May and it was also a net buyer in foreign exchange markets.

The Central Bank said in its June monetary policy statement that growth in the money supply continues to moderate while accommodating an expansion in credit to the private sector. Expansion in credit obtained by the private sector indicates a gradual pick-up in economic activity. This expansion is expected to gather momentum, particularly in view of the prevailing supportive monetary conditions.

The Central Bank said it was a net buyer in forex markets. In May the monetary authority bought 62.5 million US dollars from forex markets and there were no sales. In April it was a net buyer for 119.75 million US dollars. From 2007 the Central Bank reduced its reliance on policy rates to control inflation as it engaged in a strict quantity targeting exercise. Analysts say its latest policy action mimics the action of a central bank that relies more on the exchange rate as an inflation anchor.