CB maintains policy rates, monetary policy appropriate

Wednesday, 25 November 2015 00:21 - - {{hitsCtrl.values.hits}}

Central Bank has decided to maintain current policy interest rates as the Monetary Board was of the view that the current monetary policy stance is appropriate, the Central Bank said Tuesday in its monetary policy review for November 2015.

Accordingly, the Monetary Board has decided to maintain the Standing Deposit Facility Rate (SDFR) and the Standing Lending Facility Rate (SLFR) of the Central Bank unchanged at 6.00% and 7.50%, respectively.

Sri Lanka’s inflation measured by the Colombo Consumers’ Price Index, increased to 1.7% on a year-on-year basis in October 2015 from negative 0.3% in September 2015.

In September 2015, decline in expenditure on imports was greater than the decline in earnings from exports, narrowing the deficit in the trade account by 4.1% to $ 733 million. However, the cumulative trade deficit widened during the first nine months of the year by 3.8% to $ 6.145 billion, driven by the continued increase in non-oil imports, mainly autos.

The Central Bank expects the recent policy measures taken by the Bank and the government coupled with policy measures announced in the Budget for 2016 to curtail certain imports, particularly motor vehicles and ease the pressure on the external sector.

Earnings from tourism in the first ten months of 2015 are estimated to have grown by 17.9%, while workers’ remittances recorded a moderate growth of 1.8% in the first nine months of the year.

Gross official reserves, which stood at $6.8 billion at end September 2015, are estimated to have strengthened to around $8.0 billion by 03 November 2015 with the receipts from the ninth International Sovereign Bond issuance for $1.5 billion.

Meanwhile, the rupee has depreciated by 8.1% against the USD so far in 2015.

Considering those developments the Monetary Board was of the view that the current monetary policy stance of the Central Bank is appropriate and has decided to maintain policy rates.