Sri Lanka central bank says August money growth controlled

Sept 15, 2008 (LBO) – Sri Lanka’s central bank said it had maintained targets for reserve money, in the months of July and August, which is its main operational target instead of policy rates, causing inflation and credit growth to fall. The average reserve money in August was 280.9 billion rupees, indicating a growth of 10.3 percent over the previous 12-months, against a target of 286.5 billion rupees and a planned growth of 12.2 percent billion rupees.

In July reserve money was 278.4 billion rupees, indicating a growth of 10.1 percent over the previous 12-months, against a target of 279.2 billion rupees and a targeted growth of 10.1 percent.

The Central Bank said it was expecting to meet the reserve money targets for September 2008 as well. The September target has been set at 285.2 billion rupees.

The monetary authority said it was achieving reserve money targets by absorbing liquidity (sterilizing) through open market operations and allowing market interest rates to adjust.

It has a discount window giving liquidity to the banking system at 12.0 percent, but access is restricted. Policy rates have not been changed since February 2007.

It is also maintaining a tight peg with the US dollar at around 107.80 rupe