Tue Dec 11, 2012 2:33pm IST
* Key policy rates
seen unchanged for eighth straight month
* Central bank
expects inflation be high in December
* Announcement on
Wednesday, Dec. 12 at 0730 hours (0200 GMT
By Ranga Sirilal
COLOMBO, Dec 11 (Reuters) - Sri Lanka's
central bank is expected to keep interest rates steady for an eighth straight month
on Wednesday, a Reuters poll showed, but may consider easing monetary
conditions early next year, similar to many of its peers in Asia.
All 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. The two benchmarks are at their highest
in more than three years.
One analyst expected the central bank to
cut commercial banks' Statutory Reserve Ratio (SRR) by 25 basis points in a modest
step to support growth, which is expected to slow down to 6.8 percent this year
from a record 8.3 percent in 2011.
While central banks from Australia to Thailand
have eased policy this year to counter the global slowdown, Sri Lanka has maintained
a tight monetary stance to keep a lid on inflation and to curb the country's
fiscal and external deficits.
Since February, it has raised rates twice,
allowed rupee exchange rate flexibility, and imposed a credit ceiling after the
country saw a record trade deficit than resulted in a negative
balace-of-payments gap.
The government last month said that it
expects to meet the fiscal deficit target of 6.2 percent of the gross domestic product,
the level agreed with the International Monetary Fund under the terms of a $2.6
billion loan.
Sri Lanka's inflation rate in November
surprisingly rose to a three-month high of 9.5 percent from a year earlier
after heavy rain pushed up prices of vegetables and other food.
Central Bank Governor Ajith Nivard Cabraal
said annual inflation may be steady at 9.5 percent in December year-on-year.
"We adjusted the prices for good
reason," Cabraal told Reuters, referring to the government's decision to
pass upward price revisions in global fuel prices and imports to consumers from
early 2012.
"But we know for sure it is not as a
result of the demand.
There was no risk
from the demand side as we had imposed a credit ceiling."
Samantha Amerasinghe, an economist at
Colombo-based Standard
Chartered Bank,
projects inflation could ease in 2013, which would help the central bank to
loosen monetary policy.
"Headline inflation is likely to inch
higher in Q4 2012 due to upward revisions of administered prices of fuel and supply-side
constraints. Hence, it is too early for a rate cut in December," she said.
The rupee has fallen more than 14.3 percent
against the U.S. dollar since November last year, swelling the cost of Sri Lanka's
imports and adding to inflationary pressures.
Following are the
poll's forecasts for where rates will be after Friday's announcement:
Repo
Reverse repo SRR
(in pct)
(in pct) (in pct)
Median 7.75 9.75 8.00
Average 7.75
9.75 7.98
Minimum 7.75 9.75 7.75
Maximum 7.75 9.75 8.00
Rates in October 7.75 9.75
8.00
No. of analysts 13 13 13
($1 = 128.800 Sri Lanka rupees)
(Editing by Shihar Aneez; Editing by Kim
Coghill)
