July 3, 2007 (LBO) – Sri Lanka’s central bank says its reserve money target for June has been achieved comfortably, even as emerging fiscal signals continued to unsettle market participants. Short term rates have also become volatile this week, reaching towards 40 percent again.
The interbank market has become after several weeks of excess liquidity which is believed to be caused by a decline in net foreign assets related to fiscal activity. So far this year inflation has declined from 20.5 percent to January to 13.0 percent in June 2007, the Central Bank said.
In the first quarter economic growth was at 6.1 percent, though lower than the same period last year, analysts say it is a reasonable rate for a country mired in a crippling internal conflict.
“The achievement of reserve money targets clearly suggests that inflation will be brought under control as already predicted by the Central Bank, without causing any harmful effect on the growth momentum of the economy,” the Central Bank said in a statement Tuesday.
“After a period of 6 months, the Central Bank is pleased to announce that the actual reserve money level has so far been below the targeted limits throughout the f