Sri Lanka's central bank keep policy rates unchanged on low inflation

Sri Lanka's central bank keep policy rates unchanged on low inflation

COLOMBO, July 14 (Xinhua) -- Sri Lanka's central bank said Monday the monetary policy was kept unchanged due to low inflation and a narrowing trade deficit.

The Standing Deposit Facility Rate (Repurchase Rate) remained at 6.50 percent, while the Standing Lending Facility Rate (Reverse Repurchase Rate) was still at 8.50 percent, the central bank announced.

"Inflation recorded its lowest at 2.8 percent in June 2014 since February 2012, while the trade deficit has contracted for the eighth consecutive (month) in May 2014 by 47.9 percent," the central bank noted in its latest report.

Although prices for some food items increased, the base effect and the decline in non-food prices have contributed to the low inflation, it insisted.

Looking ahead, the central bank expected the year-on-year inflation to remain comfortably within mid-single digit levels during the remainder of the year in spite of weather related variations in agricultural produce.

Sri Lanka's exports grew by 15.7 percent to 4.45 billion U.S. dollars during the first five months of 2014 when compared to the same period last year.

The export sector strengthened further and trade deficit narrowed for the eighth consecutive month in May, down 47.9 percent to 393 million U.S. dollars.

Earnings from exports in May 2014 increased significantly on a yearly basis, up by 11.1 percent to 882 million U.S. dollars, while expenditure on imports declined by 17.6 percent to 1.275 billion U.S dollars.

The cumulative trade deficit for the first five months of 2014 contracted by 19.3 percent, as a result of a 15.7 percent growth in export earnings and a 1.5 percent decline in import expenditure, the central bank added in its report.

The central bank has projected the island country to grow by 7. 8 percent in 2014.