Sri Lanka keeps its key policy rates unchanged

Sri Lanka has decided to keep its key policy rates unchanged despite the Bank’s expectation of further slowing down of inflation during the rest of the year.

Accordingly, the Central Bank will maintain its Repurchase Rate and the Reverse Repurchase rate respectively at 7.00 per cent and 8.50 per cent, while the SRR will be at 8.00 per cent.

“Even though inflation and the inflation outlook remain benign, the Monetary Board is of the view that a change to the existing monetary policy stance is not warranted”, added the Banks November Monetary Policy Statement.

The Bank says based on provisional data, export earnings and import expenditure have seen a growth during the month of September, year on year.

The Monetary Authority says the rising of imports during the month of September was mainly due to higher imports of intermediate and investment goods.

This has included project related imports funded through financial inflows to the government which amounted to US dollars 1,460 million.

“During the first three quarters of the year, even though the deficit in the trade account has expanded, higher earnings from tourism, increased worker remittances as well as other inflows to the services account helped contain the impact of the trade deficit on the current account balance”, added the Bank in its Monthly Monetary policy statement.

According to the Bank, the growth in broad money continued into September 2011 with the year on year growth remaining high at 20.7% since June 2011.

“The rapid expansion of credit obtained by the private sector, which has increased by over Rs.37 billion on average per month in 2011, continued to fuel the growth of money supply”.

The increase in net credit to the government by the banking sector too has helped the monetary expansion.