Central Bank of Sri Lanka

January 17, 2013

Calling their current monetary policy stance “appropriate,” Sri Lankan central bank officials did not implement a follow-up easing this month after having cut the repo and reverse repo rates by 25 basis points each in December to 7.5% and 9.5%.  October’s reductions were the first cuts since 2009 and left rate levels 50 basis points above their end-2011 levels.  Two rounds of tightening occurred in the first half of last year, first by 50 bps in February and by a further 25 bps in April.  At 9.2%, Sri Lankan CPI inflation ended 2012 at a comparatively elevated level, and a downtrend is not likely until 2Q13.  However, domestic credit expansion has cooled from a previous sizzling pace, the rupee is more resilient, and the current account has improved.  Plus, the economy grew more slowly last year than officials prefer.  The next interest rate announcement is scheduled for February 15.

Copyright 2013, Larry Greenberg.  All rights reserved.  No secondary distribution without express permission.



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