COLOMBO: Sri Lanka’s central bank has kept its benchmark interest rates on hold, as expected, saying that its monetary policy stance remained appropriate as credit growth slowed down.
The Central Bank of Sri Lanka, which has tightened monetary policy three times since December, left the standing deposit facility rate (SDFR) and the standing lending facility rate (SLFR) at 7 percent and 8.5 percent respectively.
Private sector credit growth was 27.3 percent year on year in August, slowing from July’s 28.5 percent, which was its highest since August 2012.
The central bank has raised both rates by 100 basis points since February, after increasing the statutory reserve ratio (SRR) by 150 basis points at the end of 2015.
The Monetary Board “was of the view that the current monetary policy stance is appropriate” and decided to maintain rates, the central bank said in a statement.
It last raised rates by 50 basis points in July, following stubbornly high private sector credit growth and relatively strong inflationary pressures.
Central bank chief Indrajith Coomaraswamy has said that he expected the credit expansion rate to slow to 18 percent by the end of 2016.
The on-hold decision, which was in line with a Reuters poll, comes days ahead of the government’s Nov. 10 budget for the next fiscal year.
“The credit growth is coming off, but it is not as fast as they were expecting. I think further tightening may not be warranted at the moment,” Danushka Samarasinghe, research head at Soflogic Stockbrokers, said.
The Central Bank of Sri Lanka, which has tightened monetary policy three times since December, left the standing deposit facility rate (SDFR) and the standing lending facility rate (SLFR) at 7 percent and 8.5 percent respectively.
Private sector credit growth was 27.3 percent year on year in August, slowing from July’s 28.5 percent, which was its highest since August 2012.
The central bank has raised both rates by 100 basis points since February, after increasing the statutory reserve ratio (SRR) by 150 basis points at the end of 2015.
The Monetary Board “was of the view that the current monetary policy stance is appropriate” and decided to maintain rates, the central bank said in a statement.
It last raised rates by 50 basis points in July, following stubbornly high private sector credit growth and relatively strong inflationary pressures.
Central bank chief Indrajith Coomaraswamy has said that he expected the credit expansion rate to slow to 18 percent by the end of 2016.
The on-hold decision, which was in line with a Reuters poll, comes days ahead of the government’s Nov. 10 budget for the next fiscal year.
“The credit growth is coming off, but it is not as fast as they were expecting. I think further tightening may not be warranted at the moment,” Danushka Samarasinghe, research head at Soflogic Stockbrokers, said.
