Sri Lanka: No Further Monetary Tightening at This Time.

March 14, 2012

The Sri Lankan economy has issues that often require monetary policy tightening: an excessive trade deficit, private domestic credit growth of more than 30% on year, diminished international reserves, and a vulnerability.  A number of measures were taken earlier this year to address the problems including an 18% cap on credit growth and, on February 3, the first interest rate hikes by the central bank since 20007.  The repo and reverse repo rates was lifted 50 basis points at that time to 7.5% and 9.0%.  It would not have been shocking if a further tightening had occurred now, but officials demurred instead.  In a statement, they said “that the current monetary policy stance is adequate to appropriately deal with the issues at hand.”  The next meeting is scheduled for April 18.

Copyright 2012, Larry Greenberg.  All rights reserved.  No secondary distribution without express permission.

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