Sri Lanka to ease tight monetary stance in 2009.
Global Banking News - 13 January 2009(c)2005 - Electronic News Publishing - http://www.enpublishing.co.uk
Sri Lanka's central bank has said that it would ease its tight monetary policy this year, and cut the penalty rate on reverse repurchase transactions.
The central bank has been maintaining a tight monetary policy with a reserve money targeting method to curb inflation that hit a record level in June 2008, by releasing only necessary cash required to the market. The central bank kept its key policy rates at their highest level since 2002 to help bring down inflation.
'The Central Bank has decided to ease its monetary policy stance in view of the declining inflation and inflation expectations as well as the gradual decrease in market interest rates including yields on government securities,' it said. 'The Monetary Board has decided to reduce the penal rate of interest charged on reverse repurchase transactions with the Central Bank by 200 basis points to 17 percent with immediate effect.'
The central bank's penal rate currently stands at 19 percent. The bank has retained the repurchase rate at 10.5 percent, and the reverse repurchase rate at 12 percent for the 24th straight month. The central bank expects inflation of between eight to nine percent by mid 2009.
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