By Rishaad Salamat & Anusha Ondaatjie - Feb 12, 2013
7:59 AM GMT+0530
Sri
Lanka left interest rates unchanged for a second month as it seeks to damp
price pressures while supporting economic growth.
The
Central Bank of Sri Lanka kept its reverse
repurchase rate at 9.5 percent and the repurchase
rate at 7.5 percent, it said in a statement in Colombo today. Seven of nine
economists in a Bloomberg News survey predicted no change. Two forecast a
quarter-point cut in both rates.
The
island’s inflation accelerated to 9.8 percent in January, one of the highest
levels in 17 Asia-Pacific economies tracked by Bloomberg. The central bank
expects price gains to ease and Governor Ajith Nivard Cabraal said Feb. 5 its “overall view is
that this is a time to relax policy” carefully.
“The
central bank is moving towards a more dovish monetary policy stance to support
growth as inflation is expected to moderate from the second quarter onwards,” Samantha Amerasinghe, an economist at Standard
Chartered Plc in Colombo, said before the decision. “However, it’s concerned
that further policy easing could risk fuelling near-term inflationary
pressures.”
The
pace of price increases is expected to moderate after February, the central
bank said in today’s statement.
The
government’s infrastructure drive since the end of a civil war in 2009 will
help boost economic growth to 7.5 percent this year from an estimated 6.5
percent in 2012, Cabraal said last month.
The
nation on Dec. 12 lowered borrowing costs for the first time since 2011. That
followed two increases in 2012, which were part of policy changes to damp
demand for imports and pare a trade deficit that sapped currency reserves.
The
rupee has risen about 1 percent this year after falling about 10 percent
against the dollar in 2012. Officials allowed the currency to weaken last year
under the effort to narrow the trade shortfall.
Sri
Lanka is in talks with the International Monetary Fund for an extended facility
after last year completing a $2.6 billion loan program to bolster foreign
reserves.
