Sri Lanka Keeps Rates Unchanged for Ninth Month to Buoy Rupee

  • Sri Lanka central bank says inflation remains subdued
  • Rupee appreciation marginal so far in 2016, central bank says

Sri Lanka left its benchmark interest rates unchanged for a ninth straight month to help support the rupee after it hit a record low amid the global market turmoil.

The Central Bank of Sri Lanka left its standing lending facility rate at 7.5 percent and standing deposit facility rate at 6 percent, it said in a statement on Monday, a move predicted by all nine economists in a Bloomberg survey.

“The Monetary Board observed that the policy adjustments made on the monetary and external fronts are still being transmitted gradually to the macro economy,” the bank said in the statement. “In spite of the high growth of broad money, inflation remained subdued supported by low international commodity prices and broadly favorable domestic supply conditions,” the bank said.

Accelerating inflation, slowing growth and a slumping currency are complicating matters for Sri Lankan central bank Governor Arjuna Mahendran before the U.S. decides on interest rates this month. The South Asian nation is targeting more than $5 billion in foreign investment in three years compared with less than $1 billion last year.

Consumer price gains accelerated to an average of 2.5 percent since October compared with 0.4 percent in the first 10 months of 2015. That compelled Mahendran to raise the statutory reserve ratio last month for the first time since 2011. Gross domestic product grew 4.8 percent in July-September after a 6 percent expansion the previous quarter. 

The rupee touched a record low this month after weakening about 9 percent in 2015, its steepest fall since 2012.

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