Sri Lanka freezes rates, sees inflation moderating from March

Last Updated: Fri, Mar 08, 2013 02:40 hrs

COLOMBO, March 8 (Reuters) - Sri Lanka's central bank kept policy rates unchanged for a third straight month on Friday, as expected, saying inflation is expected to ease soon and reach more favourable levels by the end of the year.

"... the positive outlook for inflation is expected to continue, supported by well contained demand and favourable domestic and global supply conditions," the central bank said in a statement.

The central bank also said that although it had bought a net $486 million from the market this year, it was seeing greater stability in the rupee exchange rate owing to increased foreign exchange inflows to the government securities market and from tourism and private transfers.

The bank left the repurchase rate and the reverse repurchase rate at 7.50 percent and 9.50 percent, respectively. It also kept the commercial banks' Statutory Reserve Ratio (SRR) steady at 8 percent.

The bank also said that it has been a matter of some concern that two months after relaxing monetary policy, interest rates pertaining to both deposit and lending interest rates still remain high, but expects those rates to be adjusted in the near term in line with its easing monetary policy trend.

A Reuters poll forecast that both rates would remain unchanged from these levels, their highest in three years. (Reporting by Ranga Sirilal and Shihar Aneez; Editing by Kim Coghill)

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