Sri Lankan cbank holding policy steady

COLOMBO: Sri Lanka´s central bank is expected to keep its key interest rates steady on Tuesday, a Reuters poll showed, to support a stuttering economy even as inflation accelerates amid strong credit growth.

All 13 economists in the survey predicted the central bank would keep its standing deposit facility rate (SDFR) and standing lending facility rate (SLFR) unchanged at 7.25 percent and 8.75 percent, respectively.

They also forecast the statutory reserve ratio (SRR) to stay at 7.50 percent. The International Monetary Fund in June said further monetary policy tightening in Sri Lanka "is desirable" until there are clear signs that inflationary pressures are subsiding, and called for more measures to curb strong credit growth.

Rates in treasury bills have fallen between 86-201 basis points since April, mainly driven by foreign buying in t-bonds, which could be good for the economy but may also add to inflationary pressures.

"At the moment, economic growth is more important than strong credit," Danushka Samarasinghe, research head at Softlogic Stockbrokers. "The full year growth will be around 4.2 percent, which is below the expectation.