Sri Lanka meets reserve money targets, inflation goes haywire

Dec 26, 2007 (LBO) – Sri Lanka’s central bank kept its policy rates frozen in December with inflation raging close to 20 percent a month before, but said reserve money targets have been met this year. .
Updated The Central Bank’s policy rates remained unchanged at 12.00 percent, far below inflation as the monetary authority kept rates frozen for nearly 10 months in a row.

However, access to its discount window has been tightened and Sri Lanka now operates a dual rate regime where banks who want accommodation more than four times a month would have to borrow at 19.00 percent.

Broken Promise

In January 2007 the Central Bank said it would debauch the domestic value of the national currency by less than 10 percent by keeping to pre-declared reserve money targets, which would limit money printing.

“In order to contain the demand pressures in the economy, the Central Bank set a tight growth path for reserve money, which is the appropriate amount of new money to be injected by the Central Bank during the year,” the central bank said in its December monetary policy statement.

“The Central Bank has thus far been able to be within the respective limits during the first th

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