Sri Lanka policy rates steady as inflation rise

Dec 14, 2010 (LBO) – Sri Lanka’s central bank said it was holding rates steady at 7.25 and 9.00 percent as inflation rose and credit growth picked up amid a “sustained recovery” in economic activities. Sri Lanka has one of the highest policy rates in the world and this year’s inflation at 7.0 percent by November is low by historical levels of inflation generated by the Central Bank.

But the country’s central bank has generated less inflation than Pakistan where inflation is running at above 15 percent.

“The recent monetary easing by the Central Bank has helped improve domestic credit conditions, and thereby supported the sustained recovery in domestic economic activity,” the Central Bank said in its December monetary policy review.

“The external sector too has recorded encouraging performance in recent months.

“While domestic economic activity has rebounded strongly this year, it is expected that this growth momentum would continue into the next year too, supported by the recovery in the global economy.”

The central bank said the inflation was seen in the Colombo Consumer Price Index mostly as increases in food prices.

Sri Lanka has restrictive policies on food which m