The central bank of Sri Lanka on Friday kept its main interest rate unchanged, after reducing it at the previous meeting, saying that financial markets have responded as expected to recent policy measures and financial institutions have been gradually making the anticipated adjustments.
The Monetary Board of the Central Bank of Sri Lanka maintained its repurchase rate at 7 percent, after slashing it by 50 basis points in May. The bank also retained its reverse repurchase rate at 9 percent.
It is expected that the easing of monetary policy since December 2012 would transmit smoothly to the lending rates in the near future, thereby stimulating a sustained increase in longer term credit growth to the private sector, thus contributing to a higher level of economic activity, over the coming months, a statement from the bank said.
Sri Lanka's headline inflation increased to 7.3 percent in May from April's 12-month low of 6.4 percent, mainly reflecting the recent adjustments in electricity prices. But, core inflation continued its decreasing trend to record 5.7 percent in May.
The bank forecasts that inflation will to remain at single-digit levels in the coming months, supported by supply-side improvements and the absence of demand driven inflationary pressures.
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