CB seen keeping rates steady on Monday

Reuters: The Central Bank is expected to keep its policy interest rates unchanged at record lows on Monday, a Reuters poll showed.

The Central Bank Governor last month said that there could be a significant cut if a stable government was elected, but as of Friday afternoon, however, a stable coalition government had not been formed following the 17 August election. 

Eleven out of 13 analysts surveyed said they expect the Central Bank to leave the repurchase rate or standing deposit facility rate (SDFR) at 6.00%.

Twelve expect the reverse repurchase rate or standing lending facility rate (SLFR) to remain at 7.50%.

All 13 analysts expected the statutory reserve ratio (SRR) for commercial banks to remain at 6.00%.

Two analysts expected the Central Bank would raise the SDFR by 25 basis points amid heavy government borrowing and in line with the market interest rate hike.

Another analyst expected the Central Bank to cut the SLFR by 50 basis points, though they predicted the central bank will keep the SRR steady.

Prime Minister Ranil Wickremesinghe’s United National Party (UNP) won last week’s Parliamentary polls, but fell seven seats short of outright majority. Wickremesinghe and President Maithripala Sirisena’s parties have agreed to form a stable national unity government, which is yet to be established.

The Central Bank in April surprised markets with a 50 basis point cut to boost economic growth. Until April, rates were steady for 14 months.