ECONOMYNEXT – Sri Lanka’s commercial banks deposited 53 billion rupees in excess cash at the central bank on December 23, 2019 sharply up from 32 billion rupees on December 02, amid liquidity injections made at increasingly lower rates.
The central bank which printed 14 day money at 7.66 percent on December 13, brought the maximum rate down to 7.48 percent with making excess cash deposits go up, which is 52 percent below the 8.0 ceiling of the policy corridor.
There are expectations of a rate cut or statutory reserve ratio cut in bond markets at a policy decision to be announced on December 27.
Bond yields fell on Thursday.
Senior Economic Advisor to the Finance Minister Nivard Cabraal had said there was room to cut rates and that monetary and fiscal policy should go together at some point.
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W D Lakshaman, a 78 year old economist was appointed as Governor of the central bank this week.
In December there is a seasonal demand for real cash, but the hefty injections had generated an aggregate excess balance in the overnight market of 26 billion rupees up from 18.8 billion rupees on December 03.