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SL sees no need to adjust policy rates

22 October 2012 01:30 pm - 7     - {{hitsCtrl.values.hits}}


Sri Lanka's central bank sees no need to change its policy rates in the near future and it has reduced credit growth to the desired level, Governor Ajith Nivard Cabraal said.

"Our overall policies are working in the way we had projected and wanted it to work," Cabraal told Reuters on Monday. "So I think there is no need for us to make any further adjustments in the near future."

Cabraal was speaking ahead of the Monetary Board's October meeting, on Monday, to set policy rates. The bank will announce its monetary policy stance at 0200 GMT Tuesday.

Sri Lanka raised rates twice in the first four months of the year to nearly three-year highs and imposed tough credit controls and a flexible exchange rate to deal with trade and balance-of-payments deficits from 2011.

In February, the central bank limited credit growth to a maximum of 23 percent in 2012 from 35 percent last year. In 2011, the policy of a defended rupee and lower interest rates fueled cheap credit and a huge import bill, resulting in a record trade gap.

"Credit growth has come down to the level that we had wanted. Our view is it will be resting in that exact spot we had projected," Cabraal said without giving data on recent credit growth.

Cabraal also said the central bank, which is concerned about future inflationary pressures does not need to cut policy rates at the moment.

Keeping the rate unchanged "seems to be appropriate," he said adding that the central bank is looking at 8-8.5 percent annual inflation by end-2012.
The island nation's economic growth is projected to slow to 6.8 percent from last year's record 8.3 percent due to tough policy measures and conditions in Europe, Sri Lanka's top export destination.

Early this year, the central bank had estimated 8.5 percent growth in 2013, but Cabraal said this is too ambitious.

"The global conditions are such that it would be somewhat tough to pitch for a growth of that nature. But certainly above 7.5 percent is something that we could safely work towards," Cabraal said.

He also predicted that the rupee, which has fallen 14.8 percent since a 3 percent devaluation last November, will appreciate and settle around 125 per U.S. dollar as expected earlier due to expected inflows. On Monday, it was trading around 129.75 to the U.S. dollar.

"We are seeing some fresh inflows due to come in to the stock market, property market, and FDI (foreign direct investment)," he said without elaborating on the numbers.

The governor said he believes it is "pretty realistic" to think that the rupee could settle around 125 to the dollar. (Reuters)

  Comments - 7

  • Curious Monday, 22 October 2012 01:51 PM

    The polices are only good for him not for the country or to the rest of the world.

    silva Tuesday, 23 October 2012 03:16 AM

    You are an absolute disgrace to the position you hold.

    buffaloa citizen Tuesday, 23 October 2012 04:26 AM

    You have been saying the LKR 125 for the dollar since the exchange rate shot up to LKR 136. Your singing will not bring it down to 125 nor will it come down to 101 the day you were appointed on a platter to this post.

    Calistus Jayatilleke Tuesday, 23 October 2012 05:32 AM

    In the land of the blind, one-eyed man is the King.

    C. Seneveratne Tuesday, 23 October 2012 05:55 AM

    Cabraal without statistics it is very difficult to buy your story..

    Bushel Tuesday, 23 October 2012 09:16 AM

    Every body knows how well you can bluff just sounding hacked jargons. No need of economlcs to do what u r doing today. Go home and get back yo yout politics

    ranja Wednesday, 24 October 2012 02:22 AM


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