Mon Sep 17, 2012 3:00pm IST
* Key policy rates
seen unchanged for fifth month
* Weak rupee,
drought has fuelled inflationary pressures
* Announcement on
Tuesday, Sept. 18 at 7.30 A.M. (0200 GMT
By Ranga Sirilal
COLOMBO, Sept 17 (Reuters) - Sri Lanka's
central bank is expected to keep interest rates steady for a fifth straight
month on Tuesday despite high inflation to help bolster economic growth, which
has been cooling due to sweeping policy measures and an extended drought.
Twelve out of 13 analysts polled by Reuters
expect the repurchase and reverse repurchase rates to be left unchanged at 7.75
percent and 9.75 percent, respectively. Both rates are at their highest in more
than two years. One analyst expected the central bank to raise both rates by 25
basis points.
All the analysts surveyed expect commercial
banks' statutory reserve ratio (SRR) to be left unchanged at 8 percent.
The central bank has already raised the key
policy rates twice since February, allowed a flexible exchange rate, and
limited this year's credit growth to prevent twin deficits in trade and
balance-of-payments.
Samantha Amerasinghe, economist at
Colombo-based Standard Chartered Bank, said rising inflationary pressures seem
to be dissipating now with food inflation contracting due to improvements in
supply.
"However, as headline inflation is
still expected to hover around double-digits as we approach year-end, we feel
the central bank has limited scope for monetary easing to stimulate growth. A
rate cut might be a likely scenario in Q1-2013 with inflation expected to
moderate by then," she told Reuters.
Inflation eased to 9.5 percent in August
from a year earlier from a 42-month high of 9.8 in July on improved food
supply.
Central Bank Governor Ajith Nivard Cabraal
said last month there was no need for a monetary policy response to
accelerating inflation which he attributed largely to supply constraints
following the drought.
Though repo and reverse-repo rates were
raised by 75 and 125 bps, respectively since February, the yields in treasury
bills have risen between 276-441 bps in the same period.
The rupee has fallen more than 16.5 percent
against the U.S. dollar since November, swelling the cost of Sri Lanka's
imports.
Treasury Secretary P.B. Jayasundera on
Sept. 6 told a Reuters forum that Sri Lanka's economic growth this year may
range between 6.7 percent and 7.2 percent depending on the impact of a drought
that has lasted since the beginning of the year.
The International Monetary Fund has also
lowered its forecast for Sri Lanka's economic growth to 6.75 percent this year
from an earlier estimate of 7.5 percent and less than the central bank's 7.2
percent.
Following are the poll's forecasts for
where rates will be after Tuesday's announcement:
Repo
Reverse repo SRR
(in pct)
(in pct) (in pct)
Median 7.75
9.75 8.00
Average 7.77 9.77 8.00
Minimum 7.75
9.75 8.00
Maximum 8.00
10.00 8.00
Rates in July 7.75
9.75 8.00
No. of analysts 13 13 13
($1 = 131.8500 Sri Lanka rupees)
(Writing by Shihar Aneez; Editing by
Jacqueline Wong)
