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Sri Lanka central bank seen keeping rates unchanged

Economy Next – 03.08.2018

By First Capital Research

ECONOMYNEXT – Sri Lanka’s central bank is likely to keep its policy interest rates unchanged Friday when it makes its monetary policy announcement, First Capital equities said.

Subdued credit growth and slow economic growth warrant a rate cut, the brokerage said in a research note.

But a rate cut would serve to aggravate the continuous foreign outflow from both debt and equity markets thus increasing pressure on the rupee, they said.

“Therefore, we believe in a continuation of the current monetary policy stance. We expect the CBSL to keep Statutory Reserve Ratio (SRR) unchanged at 7.50%.”

Based on economic developments and outlook for key macroeconomic indicators pointing to more economic stability, First Capital increased the probability of a rate cut to 5% from the previous 0% while decreasing the probability of an unchanged policy stance to 95%.
(COLOMBO, 02 August, 2018)