Sri Lanka central bank seen holding key interest rates
ECONOMYNEXT – Sri Lanka’s Central Bank is expected to keep key policy interest rates at current levels given signs economic growth is picking up and inflation is under control, First Capital Holdings said in a research report.
First Capital said it believes that considering current economic conditions, with better than expected GDP growth and considerable improvement in economic health, the current monetary policy is appropriate and no change is required.
The central bank is expected to hold rates at current levels of 8.75 percent for its Standing Lending Facility Rate (SLFR) to inject liquidity into the banking system and 7.25 percent for the Standing Deposit Facility Rate (SDFR) to withdraw excess liquidity, the report said.
The central bank is expected to announce its monetary policy stance Tuesday morning.
The Colombo Consumer Price Index-based headline inflation accelerated to 7.8% from a year ago in October 2017 from 7.1% in September 2017 while the National Consumer Price Index-based inflation also accelerated to 8.6% in October 2017 from 8.6% in September 2017.
However core inflation remained under check decelerating to 5.8% in October 2017 from 6.0% in September 2017, First Capital said.
“We believe point to point inflation will be dip beyond November 2017 despite food shortages due to the higher base effect as increased VAT was implemented in November 2016.
“Further, core inflation going forward is likely to be around the 5.0% mark over the next few months.”
(COLOMBO, November 06, 2017)