Sri Lanka's Central Bank keeps policy rates steady on declining trade deficit

Sri Lanka's Central Bank has decided to keep its policy rates steady on declining inflation and trade gap, the organization said in a statement on Tuesday. Monetary Board of the Central Bank has decided that the current monetary policy stance is appropriate. Accordingly, the Repurchase rate and the Reverse Repurchase rate would remain at 7.75 per cent and 9.75 percent, respectively. The statement also noted that growth of Sri Lankan exports has decelerated during the last sixmonths, whilst demand management measures introduced in early 2012 have resulted in imports falling substantially. "With the resultant improvement in the trade balance, together with other inflows, the balance of payments has recorded a surplus of 305.9 million U.S. dollars by August, and helped to raise the current level of official reserves to 7 billion U.S. dollars, which is equivalent to around 4.3 months of imports,"it added. Year-on-year inflation declined for the second consecutive month reaching 9.1 percent in September. "While short term pressures on inflation arising from recent revisions to administratively determined prices and uncertain global supply conditions remain elevated, the tight monetary policy stance is expected to prevent second round effects of supply side factors entrenching into future inflation, and thereby help maintain inflation at mid-single digit levels over the medium term." Sri Lanka's private sector credit growth has also moderated substantially to 28.7 percent, year-on-year in August, falling below 30 per cent for the first time since March 2011.