By Anusha Ondaatjie
& Rishaad Salamat - Jan 17, 2013 11:12 AM GMT+0530
Sri Lanka’s central bank
is confident the time has come to ease rather than tighten monetary policy,
Governor Ajith Nivard Cabraal said today in a Bloomberg Television interview
after holding key interest rates following a surprise cut in December, the
first since 2011.
On monetary policy:
“We think that the rates
as it is are appropriate. We do see inflation moderating, even though there is
some possibility that there could be some kind of a slight hike in the next two
months.
‘‘But we know that the
demand-driven pressures are very clearly addressed, so therefore we are quite
confident that the time has now come to ease monetary policy than to tighten
monetary policy.
‘‘So in the next few
months we will be watching the progress carefully to see how the external
account is behaving, which has been doing reasonably well these last six
months. That would give us the opportunity of taking a decision on whether we
need to loosen monetary policy further during the course of the first half.’’
On inflation versus
growth:
‘‘We believe the
inflation-containment goal has been on track and the time has now come for us
to look into the possibility of giving a little more support to the growth
function, as well.
‘‘And that is what is
prompting us to keep monetary policy in a kind of a slow-motion reduction, so
that we would be encouraging growth to take place, which we see is being driven
by many supportive factors.
‘‘So the next few months
we believe that since inflation is pretty much under control and we would be
able to see inflation in the mid-single digit numbers by the end of this year,
the greater focus would have to be for growth, greater focus would be to
maintain stability and to ensure that the industries that Sri Lanka has
been promoting, are given the necessary investor support to take it forward.’’
On the rupee:
‘‘We did see the rupee
taking a steep depreciation in the first half of last year. But over the last
six months, we have also seen the rupee pulling back and there has been
appreciation of around 6 percent, which tells us that whatever happens in the
next few months, it should be a slower process than what we have experienced.
‘‘So we are encouraging
the rupee to stay stable and although the outlook seems to be that there would
be mild pressure for the rupee to appreciate, we would like to see that being
handled or moving in a fairly reasonable and slow pace rather than to have any
volatile movement.
‘‘We are satisfied where
it is because it gives a very good handle for importers, exporters, lenders as
well as borrowers and we would like to see any movement to be slow rather than
being volatile as we have experienced sometime in the first half of last
year.’’
