Central Bank to keep rates steady today
31 August 2015 03:09 am
REUTERS: Central Bank is expected to keep its policy interest rates unchanged at record lows today, a Reuters poll showed.
The Central Bank Governor last month said that there could be a significant cut if a stable government was elected, but as of Friday afternoon, however, a stable coalition government had not been formed following the Aug 17 election.
Eleven out of 13 analysts surveyed said they expect the Central Bank to leave the repurchase rate or standing deposit facility rate (SDFR) at 6.00 percent.
Twelve expect the reverse repurchase rate or standing lending facility rate (SLFR) to remain at 7.50 percent.
All 13 analysts expected the statutory reserve ratio (SRR) for commercial banks to remain at 6.00 percent.
Two analysts expected the Central Bank would raise the SDFR by 25 basis points amid heavy government borrowing and in line with the market interest rate hike.
Another analyst expected the Central Bank to cut the SLFR by 50 basis points, though they predicted the Central Bank will keep the SRR steady.
Prime Minister Ranil Wickremesinghe’s United National Party (UNP) won last week’s parliamentary polls, but fell seven seats short of outright majority.
Wickremesinghe and President Maithripala Sirisena’s parties have agreed to form a stable national unity government, which is yet to be established.
The Central Bank in April surprised markets with a 50 basis point cut to boost economic growth. Until April, rates were steady for 14 months.
May private sector credit growth soars
The private sector credit growth surged in May to Rs.48.6 billion picking up from Rs.14.5 billion recorded a month ago, the Central Bank data showed.
The private sector credit in the first 5 months rose 17.6 percent year-on-year (yoy) to Rs.2908.2 billion, significantly higher than the projected 15.5 percent private sector credit growth for 2015.
Net credit to the government also rose to Rs.35.9 billion from Rs.13.7 billion in the previous month.
Credit to state-owned corporation in May however recorded a payback of Rs.900 million against a credit growth of Rs.13.1 billion in the previous month, probably reflecting the materializing of the better management processes introduced by the new regime.
Despite this, credit to corporations still remains high for the first 5 months of the year at Rs.496.9 million, up 50.4 percent yoy.
At the same time The majority of the borrowings by the corporations amounting to Rs.294.4 billion were drawn from foreign currency banking units (FCBUs), which is an increase of 59.3 percent YoY.
Net credit to the government in the first five months rose 20.9 percent yoy to Rs.1662.7 billion.
Out of which the government had borrowed Rs.1191.2 billion from domestic banking units (DBUs), up 15.3 percent yoy and Rs.270 billion from FCBUs, up 37.9 percent yoy.