Sri Lanka's central bank kept its key interest rates unchanged as the economy operates below its potential.
The monetary board of the Central Bank of Sri Lanka, on Thursday, maintained the standing deposit facility rate at 7.25 percent and the standing lending facility rate at 8.75 percent.
"The decision of the Monetary Board is consistent with the objective of maintaining inflation at mid-single digit levels over the medium term and thereby facilitating a sustainable growth trajectory," the bank said in a statement.
The central bank forecast consumer prices to register a substantial fall in January and both headline and core inflation to stabilize in the desired mid-single digit levels during the remainder of 2018.
The bank observed that the economy is operating at a level below its potential. However, it is forecast to recover from the adverse effects of weather conditions and benefit from the expected boost in external demand and foreign direct investment inflows.
The economic growth is set to remain lacklustre this year, Alex Holmes, an economist at Capital Economics, said.
The upshot is that the central bank should be able to provide some support to the economy, perhaps as soon as next quarter, Holmes added. The economist expects two rate cuts this year.
by RTT Staff Writer
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