Current interest rates to remain, Central Bank says
View(s):The Monetary Board of the Central Bank on Tuesday, contrary to expectations from Sri Lanka’s money markets, announced that policy interest rates will remain as it is.
“Taking the above factors into consideration, the Monetary Board at its meeting held on 23 February 2015, decided to maintain policy interest rates of the Central Bank unchanged at their current levels. Accordingly, the Standing Deposit Facility Rate (SDR) and the Standing Lending Facility Rate (SLFR) of the Central Bank would remain at 6.50 per cent and 8.00 per cent, respectively,” the Bank said in a statement. The board meeting was held on Monday and Colombo’s stockmarket was also awaiting signals and expectations that interest rates would rise.
The Bank in a statement said that year-on-year (y-o-y) headline inflation increased to 3.2 per cent in January 2015 from 2.1 per cent in December 2014 while annual average inflation declined marginally to 3.2 per cent from 3.3 per cent recorded in the previous month. The increase in inflation in January was attributed to higher food prices, which have now broadly stabilised. “The impact of the recent downward price revisions of domestic petroleum prices as well as of essential consumer items would be reflected in official price indices from February, which would result in a considerable downward shift in inflation in the period ahead. Accordingly, it is expected that inflation, which has registered single digit rates in the post-conflict period, will continue to remain comfortably low in 2015,” it said.
On the external front, the Sri Lankan rupee depreciated against the US dollar by 1.4 per cent by 20 February 2015 year-to-date, mainly due to higher import demand. With this seasonal demand gradually easing and the realisation of the anticipated foreign investment inflows, it is expected that the external sector would show greater resilience during the remainder of the year, it said.