Wed Jan 16, 2013 11:16am IST
* Rates seen steady
Thursday after unexpected cut last month
* Analysts expect
at least 25 bps cut in first half
* Announcement on
Thursday, Jan. 17 at 0730 hours (0200 GMT) By Ranga Sirilal
COLOMBO, Jan 16
(Reuters) - Sri Lanka's central bank is expected to keep key policy rates
steady on Thursday after last month's surprise rate cut, a Reuters poll showed,
but analysts see further easing in monetary conditions during the first half.
Eleven out of 14
analysts polled by Reuters expect both the repurchase and reverse repurchase
rates to be left unchanged at 7.50 percent and 9.50 percent, respectively, this
week.
Two analysts
expected the central bank to cut both rates by 25 basis points (bps), while one
predicted the monetary authority to cut only the reverse repurchase rate by 25
basis points.
Thirteen analysts
expected the central bank to keep commercial banks' Statutory Reserve Ratio
(SRR) steady at 8 percent, while one predicted a 50-basis-point cut.
In December, the
central bank surprised markets by cutting both rates by 25 bps, the country's
first easing in nearly two years, lowering them from three-year highs to boost
faltering economic growth as inflation pressures were expected to ease.
Growth is expected
to have slowed to 6.5 percent last year from a record 8.3 percent in 2011. The
central bank forecasts expansion of 7.5 percent this year.
"We believe the 25 bps rate cut in
December to support growth was a pre-emptive move, as inflation remains
stubbornly high," Samantha Amerasinghe, an economist at Colombo-based
Standard Chartered
Bank, told Reuters.
She said
growth-related concerns have emerged following a weaker-than-expected expansion
of 4.8 percent in the third quarter from a year earlier.
"Premature
policy easing would risk fuelling inflationary pressures," Amerasinghe
said.
Other analysts said
they expect at least another 25 basis points of rate cuts in the first half of
the year. Annual inflation eased to 9.2
percent in December from a three-month high of 9.5 percent in November.
The central bank
removed a credit ceiling from Jan. 1 to boost growth after it maintained a
tight monetary stance in 2012 to keep a lid on inflation and to curb the
country's fiscal and external deficits.
The central bank
raised rates twice since last February, 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 in November 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.
The rupee fell 10.7 percent against the
U.S. dollar 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 Thursday's announcement:
Repo Reverse repo SRR
(in
pct) (in pct) (in pct)
Median 7.50 9.50 8.00
Average 7.46 9.45 7.96
Minimum 7.25 9.25 7.50
Maximum 7.50 9.50 8.00
Rates in December 7.50 9.50 8.00
No. of analysts 14 14 14
($1 = 126.55 Sri Lanka rupees)
(Editing by Shihar Aneez & Kim Coghill)
