Sri Lanka’s interest rates “appropriate” to current conditions: CB Governor

Apr 09, 2014 (LBO) – Sri Lanka’s interest rates “appropriate” to current conditions where returns particularly on deposits of senior citizens have fallen sharply, Central Bank Governor Nivard Cabraal said. Sri Lanka’s inflation has fallen to around 4 percent in the past quarter and one year deposit rates in commercial banks are around 6 to 7 percent about the same as short term Treasuries yields.

“The conditions that are prevalent today as far as the interest rates we have maintained are the appropriate,” Central Bank Governor Nivard Cabraal told reporters.

“We are not only looking at inflation as it is today. We are also looking at the country adjusting to the new framework within which we are hoping to work within the next few years.”

Cabraal said banks and insurance companies are being encouraged to come up with longer term savings products and annuities in the context of more stable long term yields and inflation.

Sri Lanka’s inflation and exchange rates has been generally stable over the past few years with the core budget deficit also falling, but state intervention in energy pricing has driven the country into balance of payments trouble and high inflation in 2008/9 and 2011/12.