July 17, 2013 (LBO) – Sri Lanka expects to keep rates on hold till September, and policy rates will be kept unchanged this month, a media report said.
“We had to ensure that the policy measures that we have put in place now are not reversed too quickly and thereâ€™s no need to reverse it as well because the inflation outlook also
seems to be benign,â€ he said.
“In those conditions I see that we could be more toward the relaxation side without having
to pull back in the foreseeable future.
“The chances are that what we have needed to do we have done. We think that the steps that we have taken should take us at least until September.”
Sri Lanka’s rupee has weakened over June and has dropped further in July after liquidity flooded money markets from a reserve ratio cut.
A depreciating currency can add to inflation, though external conditions are also favourble with the Fed expected to pull back from its quantity easing program.
Cabraal said he was comfortable with the inflation outlook.