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Sri Lanka holds key rate at 1o.5% to boost growth
Sri Lanka's central bank kept its benchmark interest rate unchanged at the highest level since 2002 to help bolster growth amid the fastest inflation in at least four years.
- Bloomberg
- Published: 00:06 May 27, 2008
Colombo: Sri Lanka's central bank kept its benchmark interest rate unchanged at the highest level since 2002 to help bolster growth amid the fastest inflation in at least four years.
The Central Bank of Sri Lanka maintained its repurchase rate at 10.5 per cent for a 15th straight meeting, the Colombo- based bank said in a statement yesterday. Sixteen out of 17 analysts surveyed by Bloomberg News predicted the decision. One analyst expected a 25 basis point increase.
Governor Nivard Cabraal joins central bank chiefs in Asia in balancing the threat of slowing growth against accelerating inflation. Consumer prices in the capital Colombo rose 25 per cent in April from a year earlier, after gaining 23.8 per cent in March, on higher food and energy costs.
"Once again it comes down to the fact of growth versus inflation targeting, with authorities preferring growth," said Romesh Gomez, a trader at First Capital Treasuries Ltd. in Colombo.
The central bank on April 30 said it was revising down its quarterly targets for reserve money for this year, which would help in "containing the demand driven component of inflation, ultimately containing further inflationary pressures."
Tight leash
Central Bank of Sri Lanka has kept monetary policy tight with its daily open-market operations to adjust the amount of cash in the banking system and by controlling credit demand.
The yield on the 15.5 per cent bond due in January 2010 rose five basis points to 17.95 per cent in Colombo, according to First Capital Treasuries Ltd. The rupee was little changed at 107.7 to the dollar, according to First Capital.
Sri Lanka's inflation may slow to 14 per cent by the end of this year.
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