Sri Lanka Holds Rates to Support GDP Growth, Restrain Inflation

Sri Lanka left interest rates unchanged for a third month in a bid to support economic growth while restraining consumer-price increases.

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. Ten of 11 economists in a Bloomberg News survey predicted no change. One forecast a 0.25 percentage point reduction in both benchmarks.

Central Bank Governor Ajith Nivard Cabraal said Feb. 21 he will refrain from cutting borrowing costs in the first half of this year, seeking to rein in an inflation rate of almost 10 percent, one of the highest in Asia. He also aims to revive economic growth in 2013, predicting a 7.5 percent expansion, up from an estimated 6.5 percent in 2012.

“Sri Lanka will need to lower interest rates to boost growth,” Sarath Rajapakse, director of research at Capital Trust Securities Pvt. in Colombo, said before the release.

Consumer prices rose 9.8 percent in February from a year earlier, the fastest after India in a group of 17 Asia-Pacific economies tracked by Bloomberg.

Inflation will moderate from March onwards, the central bank said in the statement. Economic growth momentum is going to be “pretty strong” in the next few months, Cabraal said in an interview with Bloomberg Television today.

Sri Lanka’s Treasury Secretary P.B. Jayasundera said last month he expects better agriculture supply to help slow the pace of price increases to about 8 percent this year.

The rupee has strengthened 0.3 percent against the dollar this year. The Colombo All-Share Index is up 0.7 percent in the period.

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