Sri Lanka Central Bank raises interest rates by 0.5% to contain inflation

Feb 23 (LBO) – Sri Lanka's central bank Friday raised its key policy interest rate by 50 basis points to 12.00 percent to dampen rising prices as inflation rose to a record 20.5 percent in January.

The bank also said finance, energy and trade ministries have been ordered to co-ordinate their efforts to reduce inflationary pressures.

Inflation has been on a rising trend since April 2006 with the Colombo Consumer Price Index reaching 19.3 percent in December and 20.5 percent in January.

The annual average inflation has also increased from 13.7 per cent in December 2006 to 14.8 per cent in January 2007 as a result of demand and supply factors.

"In view of these developments and having identified the necessity of further tightening the monetary policy in order to meet the inflationary pressures and to realise the monetary targets, the Monetary Board has decided to increase the Central Bank’s policy interest rates, viz. the Repurchase and Reverse Repurchase rates by 50 basis points each," the Central Bank said.

"Accordingly, the Repurchase rate and the Reverse Repurchase rate will be at 10.50 per cent and 12.00 per cent, respectively with effect from 23 February 2007."

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