Sri Lanka holds policy rates steady

Jan 19, 2010 (LBO) – Sri Lanka’s central bank said it was keeping its main reverse repurchase policy rate at which money is injected to markets steady at 9.75 percent, though inflation has started to pick up.

“Though some volatility has been observed in the short term money market rates in recent weeks, market interest rates have declined to lower levels by end 2009 in response to the monetary policy measures taken by the Central Bank.”

The repo rate at which excess liquidity is drained from markets will also remain steady at 7.50 percent. In December, 12-month unadjusted inflation rose to 4.8 percent with rising concerns.

“The gradual increase in inflation, on a year-on-year basis, was expected, given the low base and the rebounding of international commodity prices along with the recovery in the global economy,” the Central Bank said in its January monetary policy statement.

“Nevertheless, projections of inflation for 2010 indicate benign inflationary pressures, enabling inflation to be in single digits by year end.”

Meanwhile credit to private businesses had also picked up in November.

“It is expected that this development would be further strengthened along with activity in