Sri Lanka’s cenbank keeps rates stable; said transitory inflation

Band Uditha Jayasinghe and Swati Bhat

COLOMBO / MUMBAI, November 25 (Reuters)that of Sri Lanka the central bank kept interest rates stable for a second consecutive meeting Thursday as it sought to support a nascent economic recovery after raising rates in August to curb inflationary pressures.

The Central Bank of Sri Lanka (CBSL) left the permanent deposit facility rate and the permanent lending facility rate unchanged at 5.00% and 6.00%, respectively. He also left his legal reserve report unchanged at 4%.

Five out of 12 economists polled by Reuters planned rates to remain unchanged, while the other seven had seen the CBSL increase between 25 and 50 basis points to cope construction price pressures.

The central bank said that while the economy is gradually recovering, the recent acceleration in inflation was mainly due to shortages due to supply chain disruptions and soaring global commodity prices.

“A further acceleration in headline inflation is possible in the immediate future, although such movements are expected to be transitory,” CBSL said in a statement.

Colombo’s consumer price index hit 7.6% in October from 5.7% in September, well above the central bank’s 4-6% target range.

“The Council (…) reiterated its commitment to keep inflation at target levels in the medium term with appropriate measures, while helping the economy to reach its potential in the coming period,” added the CBSL.

The CBSL also said its recent monetary policy measures would help curb excessive demand pressures and prevent the build-up of unfavorable inflation expectations.

“While real GDP growth is projected at around 5% in 2021, the continued increase in COVID-19 infections both globally and nationally could impact this expectation to some extent,” said CBSL.

(Edited by Ana Nicolaci da Costa)

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