Sri Lanka holds policy rate steady

May 20, 2010 (LBO) – Sri Lanka’s central bank said it was holding policy rates steady at 9.75 percent amid a pick up in bank credit to private businesses and a dip in annual inflation in April 2010. “Developments in the monetary sector have been encouraging,” the Central Bank said.

“Credit obtained by the private sector, which contracted since April last year, on a year-on-year basis, has begun to improve and indicates a positive growth in March 2010.

“This development is attributable to the easing of monetary policy as well as improving financial conditions and the resulting downward adjustment in market interest rates.

“The gradual expansion in credit obtained by the private sector indicates the solidifying recovery in the economy.”

The central bank said growth in broad money, which includes savings deposits, had slowed to 17.1 percent in March from 18.6 percent in December 2009, which was in line with a monetary program announced in January.

“Price pressures in the economy have been dampened by improvements on the supply side, particularly the noteworthy performance in paddy production in the Maha season,” the Central Bank said.

“Prices of key commodities in the