June 04, 2007 (LBO) – Sri Lanka has reached its reserve money target for May with several billion rupees to spare, indicating that inflation will continue to move down in the future, the Central Bank said. “The achievement of reserve money targets will lead to the continuous deceleration of the growth in broad money and inflation,” the monetary authority said in a statement.
The target for reserve money for May 31 was 250.4 billion rupees but the bank achieved an actual reserve money number of 246.2 billion.
Central Bank said it was now clear that the target of 250.4 billion rupees set for June 2007 can be achieved comfortably.
The bank previously published its quarterly reserve money targets in a road map released in January.
“In addition, the Central Bank maintains a monthly indicative targeted path for reserve money to guide the monetary policy,” the bank said.
“This is an outcome of the maintenance of a tight monetary policy stance.”
Though Sri Lanka still maintains a policy rate regime on paper, the bank is operating a strict quantity targeting regime with severe restrictions to its discount window, which has brought dividends in the form of low inflation.