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Sri Lanka CB Governor says rates have room to fall, rupee undervalued: report

COLOMBO (EconomyNext) – Sri Lanka’s interest rates have room to fall, and the rupee may be slightly undervalued, a media report quoting Central Bank Governor Arjuna Mahendran said.

Because "inflation expectations are well anchored" there was room for interest rates to fall further, but the Central Bank was closely watching data, Bloomberg Newswires, reported.

With good rain, supply side factors were positive, and if oil prices come down further it can help ease rates, he said in an interview with Bloomberg.

The rupee was perhaps "slightly undervalued" because of a steep depreciation in 2012. The International Monetary Fund has also said in March that the rupee was fairly valued.

A fall in foreign reserves was temporary and the IMF has said in February that there was no problem in the balance of payments, Mahendran said.