StanChart sees no room for further monetary easing

21 May 2013 03:12 am - 0 - {{hitsCtrl.values.hits}}

A A A

Issuing an Economic Alert, Standard Chartered said that they did not see space for further easing in monetary policy, given the inflation risks remaining high. The bank thus expects the current rates to remain stable at least until 1Q’ 2014.

“Although domestic and global supply conditions are likely to improve, inflation remains elevated and is still a risk owing to domestic factors (fiscal pressures); hence in our view there is no room for further policy rate cuts,” the bank said in its May Economic Alert.

Standard Chartered further expects inflation to spike in 4Q13 despite the expected moderation in headline inflation to 6.4 percent in 1Q13 and 6.3 percent in 2Q13 created space for the Central Bank to cut rates by 50 basis points to boost domestic demand.

“We expect inflation to spike in 4Q13 due to a pick-up in domestic demand and private-sector investment resulting from current policy easing and lower interest rates,” Standard Chartered said, analyzing the inflation trend over the past three years in 4Q, where seasonality plays an active role.

Standard Chartered, which earlier expected a two 25bps cuts by year end, termed the May 10 decision by the Central Bank as ‘aggressive’ but said it sent a clear signal that growth concerns override inflation risks, while also reducing the likelihood of further rate cuts in 2013.

However, the Central Bank Governor said the higher than expected rate cut was to reduce uncertainty in the market about future costs, indicating a stable policy-rate environment for the remainder of the year.

Standard Chartered further pointed out that during JanuaryApril 2013, net government borrowing (via T-bills and T-bonds) was equivalent to 83 percent of the budgeted full-year amount, much higher than the 58 percent figure for the same period last year. This indicates that the government is front-loading its market borrowing.

“We believe subdued tax revenues amid slowing GDP growth might have led to increased reliance on market borrowing to fund the fiscal deficit. Expectations of fiscal slippage and additional market borrowing are likely to remain high, limiting further T-bond gains,” Standard Chartered remarked.

Order Gifts and Flowers to Sri Lanka. See Kapruka's top selling online shopping categories such as Toys, Grocery, Kids Toys, Birthday Cakes, Fruits, Chocolates, Clothing and Electronics. Also see Kapruka's unique online services such as Money Remittence,Astrology, Courier/Delivery, Medicine Delivery and over 700 top brands. Also get products from Amazon & Ebay via Kapruka Gloabal Shop into Sri Lanka

Comments - 0

Add comment
Comments will be edited (grammar, spelling and slang) and authorized at the discretion of Daily Mirror online. The website also has the right not to publish selected comments.

StanChart sees no room for further monetary easing

Comments - 0

Add comment

RECOMMENDED

‘Spike in blast fishing’ poses renewed threats to Sri Lanka’s marine ecosystems

UDA owned land in Thalawathugoda; UDA Minister Prasanna Ranatunga under the spotlight for forceful occupation of reserved land

Loss-making SMIB faces political pressure in recovering loans

Baltimore Bridge Collapse: MV Dali, SL authorities anchored in mystery?

Has Sri Lanka become a potential hub for the illegal wildlife trade?

Spotlight on Moragahakanda Development Project Moragolla villagers lose livelihoods and down to one meal a day

Ambitious Sri Lankan jobseekers ‘trafficked into Ukraine war zones’

Most Viewed in News

SL on alert on possible genocide allegations by Canada

Sri Lankan among NASA’s new crew for next simulated Mars journey

Two racing drivers arrested over Fox Hill tragedy

Racing event tragedy leaves seven dead including eight-year-old child

Complaint lodged over Piumi Hansamali's possession of Gota’s Range Rover

Gota fires back at Cardinal, rebuts allegations

MIRROR CRICKET

Sahan Arachchige to lead Sri Lanka ‘A’

Is Chamari Athapaththu Sri Lanka’s greatest cricketer ever?

Athapaththu back atop ICC Women’s ODI Batting Rankings

Chamari Athapaththu sets big goal for T20 World Cup

TODAY'S HEADLINES

Foreign powers intensify surveillance on Presidential elections as strategic interests take centre stage

New uterine loop for monkey birth control

Sajith avoids reception hosted for Iranian President

Do not be afraid to use weapons, Minister Alles tells police

Sahan Arachchige to lead Sri Lanka ‘A’

Dates confirmed for 78th Bradby Shield

SLAS appoints independent committee for investigation

Pakistan lose key players for last two T20Is against New Zealand