The Monetary Board could hold key policy rates steady at their current levels when they meet for the first time in 2021 next Monday to determine if the current stimulus is sufficient to lubricate the wheels of the economy, which is largely expected to make a rebound in 2021.
In a pre-policy analysis First Capital Research (FCR) said, excess liquidity, gradual rebound in private sector credit, rock bottom interest rates and the possibility of adverse impacts from overdoing the monetary easing, could induce the rate setting committee to stay pat.
The Central Bank resorted to unprecedented levels of monetary easing through key policy rate cuts, slashing of statutory reserve ratio and the bank rate, lowering of administered lending rates and changing the overall tone of the monetary policy towards dovishness to provide the much needed stimulus to the economy, battered by political uncertainty through November 2019 and then by a worldwide pandemic.
During 2020 alone the Central Bank slashed its key policy rates by 250 basis points in five occasions.
While no drastic policy measures are expected at next week’s meeting, the Monetary Board might announce lending targets to licensed banks, as indicated earlier.
In December 2020, the Monetary Board unveiled a housing loan bonanza for the salaried employees with clear guidelines issued to the banks.
The Central Bank expects private sector credit to record 14 percent growth this year, which indicates that the Central Bank is unlikely to take its foot off the gas peddle of providing support to the economy.
FCR also said the current excess market liquidity, which is at Rs.266.5 billion is the highest in three years, a condition which warrants no further policy easing at the upcoming review.
“Accordingly, this excess liquidity in the system is expected to retain market interest rates at single digit levels while inducing further credit expansion.”
FCR last week said, current slide in interest rates might be exhausted by the end of 2021 first half.
Add commentComments 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.
Sri Lanka is presently experiencing a tremendous economic crisis. Several k
With the increase in egg prices the government decided to import eggs to regu
In order to critically discuss a movement, we must first understand its etymo
Many battles were fought during the long war between the Sri Lankan armed for
31 Mar 2023 - 6 - 1034
29 Mar 2023 - 2 - 1017
28 Mar 2023 - 8 - 1043
24 Mar 2023 - 1 - 1411
31 Mar 2023
31 Mar 2023
31 Mar 2023
Name - Reply Comment