Sri Lanka central bank cuts reverse repurchase rate

Aug 20, 2010 (LBO) – Sri Lanka’s Central Bank said it has cut its reverse repurchase rate by 50 basis points to nine percent with immediate effect, while keeping the repurchase rate steady at 7.25 percent to support an economic recovery as inflation eased. “While inflationary pressures in the domestic economy have continued to be benign in the recent months, enhanced prospects for domestic agricultural produce have further improved the outlook for inflation.”

The Central Bank said that it began easing its monetary policy stance in 2009 in order to stimulate economic activity considering the improving outlook for inflation.

Broad money (M2b) has decelerated in the recent months while macroeconomic conditions have remained stable.

“Market interest rates have adjusted downwards, although at a slower pace, in response to the easing of the monetary policy stance,” the statement said.

“Yield rates on government securities in the primary market have declined during the recent months while the prevailing positive outlook for the economy has also made possible, the issue of Treasury bonds with maturities of up to ten years.”

The central bank said other market interest rates have also declined, but that some lending rates are “yet to sho