Sri Lanka’s central bank isexpected to keep its key monetary policy rates steady onMonday, a Reuters poll showed, to shrug off any inflationarypressure after cutting the rates six times this year.
A median forecast of 14 analysts predicted the central bankwould keep its rates unchanged at multi-year lows.
The central bank has so far in 2009, cut the repurchaserate by 300 basis points to 7.5 percent and the reverserepurchase rate by 225 basis points to 9.75 percent, both atmulti-year lows to stimulate credit growth and spur a faltering growth.
The economy, still struggling to recover from the globalfinancial crisis and a civil war in the first five months, isexpected to expand at an eight-year low of 3.5 percent thisyear, from 6 percent last year, according to the central bank.
The bank has repeatedly said it would cautiously relax therates to spur the growth while keeping tabs on inflation, whichrose to 2.8 percent in November from 1.4 percent a monthearlier, due to low base effect and rise in food prices. [ID:nCOL363998]
The central bank has predicted annual inflation to risebetween 3-4 percent in December due to a low base effect andincreasing consumer spending amid recovery in private sectorcredit growth. It forecasts single-digit levels throughout2010.
In October, Sri Lankan President Mahinda Rajapaksa in hiscapacity as finance minister ordered state banks to slashlending rates by almost half, after repeated cuts by thecentral bank failed to bring down commercial lending rates. [ID:nSP486606]
The weighted average prime lending rate is at 11.48percent, while average market lending rates are still hoveringover 15 percent. The benchmark 91-day T-bill yield is at 7.51percent. It rose 25 basis points in last two weeks from a five-year low.
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