Business Times

Inflation to remain subdued in coming months : CB

Inflation, as measured by the year on year change in the Colombo Consumers’ Price Index, though rising to 5.8 % last month from 5 % in August, is expected to remain subdued over the coming months, the Central Bank said this week in its monthly, monetary review of the economy.

It said economic growth remained robust and broadbased with all sectors contributing to the expansion of output. Credit flows continued to rebound with credit to the private sector from commercial banks growing on a year on year basis by 12.8 % in August, further reinforcing the growth prospects. At the same time, year on year growth in broad money remained moderate at 13.9 % in August.

“The successful issue of the 10-year international sovereign bond on September 27 at a comparatively lower coupon rate of 6.25 % and attracting an order book of more than six times the value of the bond reflects the improved investor confidence in the economy. Gross international reserves further increased with the receipt of the fifth tranche of the IMF-SBA facility and the proceeds of the international sovereign bond,” the Bank statement said.

Taking into consideration these current and expected developments in the economy, the Monetary Board, at its meeting on October 18 decided to maintain the policy interest rates of the Central Bank unchanged. Accordingly, the Repurchase rate and the Reverse Repurchase rate of the Central Bank would remain at 7.25 % and 9 %, respectively.

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