The Central Bank (CB) on Thursday raised interest rates for the second time in two months, saying the earlier increase hasn’t curtained worrying credit growth.
Following a meeting of the Monetary Board on Thursday evening, the Repurchase rate and the Reverse Repurchase rate of the Central Bank was increased by 25 basis points and 75 basis points, respectively, to 7.75 % and 9.75 % with immediate effect. On February 3, both rates were increased by 50 basis points to 7.5% and 9 %, respectively.
“… notwithstanding the increase in the Central Bank policy interest rates in February 2012 and the Direction issued to restrain the growth of credit extended by licensed banks, there are still some signs that credit growth is continuing at an undesired pace. Therefore, the Monetary Board is of the view that a further adjustment of policy rates of the Central Bank is warranted to ensure a smooth deceleration of credit growth through the year in order to achieve the target set for end year, and to anchor inflation expectations,” the CB statement on Thursday, said.
The statement, a few days before the Bank releases its 2011 annual report on Monday, April 9, said the economy last year grew by 8.3 % - the highest recorded post-independence growth rate - from 8 % 2010, with increased contribution from the industry and services sectors. The growth in agriculture sector was subdued, but was adequate to enforce a substantial downward pressure on domestic commodity prices. While year-on-year non-food inflation increased in March 2012 due to the full impact of the adjustment of domestic energy prices and bus fares, year-on-year food inflation remained negative for the third consecutive month. |
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