June 16, 2010 (LBO) – Sri Lanka is holding its main policy rate at which money is injected to the economy steady at 9.75 percent with inflation falling and credit to businesses expanding, the Central Bank said. 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.
“Growth in the money supply continues to moderate while accommodating an expansion in credit to the private sector,” the Central Bank said in its June monetary policy statement.
“Expansion in credit obtained by the private sector indicates a gradual pick-up in economic activity, and this expansion is expected to gather momentum, particularly in view of the prevailing supportive monetary conditions.”
The central bank has earlier forecast inflation to fall after April.
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.
In the first two months of the year, the Central Bank lost foreign reserves as it engaged in ‘quantity easing’, to monetize debt and fill cashf