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Sri Lanka’s Central Bank keeps policy rates unchanged in March
18 Mar, 2015 08:50:43
Mar 18, 2015 (LBO) – Sri Lanka’s Central Bank has decided to keep the standing deposit facility rate unchanged at 6.50 percent and standing lending deposit facility rate at 8.00 percent.

The monetary board of the Central Bank has also decided to keep the statutory reserve ratio unchanged at 6.00 percent at its meeting held on 17 March 2015.

Credit obtained by the private sector from commercial banks has increased by 11.5 percent year-on-year in January 2015, while in absolute terms, credit disbursements during the month amounted to 21 billion rupees.

“Credit to the private sector from commercial banks is expected to sustain its growth momentum in the period ahead benefiting from low market interest rates and increased business confidence,”

With the increase in credit flows to the private sector, the Central Bank removed the restriction placed on the access to its standing deposit facility by OMO participants with effect from 02 March 2015.

“Following this, the overnight interest rates moved upwards and settled within the policy rate corridor closer to the lower bound,”

“Despite some upward movements in interest rates in certain market segments, the low interest rate environment is expected to continue...”

“Supported by higher domestic credit expansion including credit granted to the government and public corporations, broad money growth was 12.6 per cent on a year-on-year basis in January 2015.” the Central Bank said.

According to recently released data by the Department of Census and Statistics, the Sri Lankan economy is estimated to have grown by 7.4 percent in 2014 compared to 7.2 percent in 2013.

"This growth was mainly supported by the expansion in the industry sector, which grew by 11.4 percent and the services sector, which grew by 6.5 per cent,"

“The agriculture sector that was affected by adverse weather conditions, recorded a marginal growth of 0.3 percent.” the Central Bank said.

Headline inflation on a year-on-year basis decreased significantly to 0.6 percent in February 2015 from 3.2 percent in the previous month reflecting the downward revision of domestic fuel prices and the reduction in the prices of certain essential items announced in the Interim Budget 2015.

“Given the impact of such measures and supported by improved supply conditions, headline inflation is likely to remain at low levels, particularly in the first half of 2015.” the Central Bank further said.

Core inflation, which reflects underlying demand pressures in the economy, declined to 0.8 percent year-on-year in February 2015 compared to 2.1 percent in January 2015.

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