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* Sri Lanka maintains policy rates as economy shows signs of improvement
Mon, Feb 17, 2014, 10:43 am SL Time, ColomboPage News Desk, Sri Lanka.

Feb 17, Colombo: Sri Lanka's Central Bank has decided to maintain current policy interest rates as its Monetary Board is of the view that the current monetary policy stance is appropriate.

Accordingly, the Standing Deposit Facility Rate (Repurchase Rate) would remain at 6.50 percent while the Standing Lending Facility Rate (Reverse repurchase Rate) remains at 8.50 percent, the Central Bank announced Monday.

The inflation, at 4.4 percent in January 2014, continued to remain at single digit levels for the 60th consecutive month, and is expected to remain at these levels throughout the year.

The Central Bank said the effect of Federal Reserve quantitative easing is expected to be minimal as a result of its "prudent" policies that have been in place to attract investors who have a serious and long term view of the Sri Lankan economy.

Even after the quantitative easing has been in progress, inflow into the country's stock and bond markets this year through February 10 amounted to a net US$119 million and the Central Bank has so far absorbed a net US$ 58.7 million from the domestic foreign exchange market keeping the Rupee stable.

Both current and capital accounts of the Balance of Payments (BOP) have improved in December 2013, resulting in a stable exchange rate and a favorable international reserve position, the Central Bank said.

According to the Monetary Board, the overall capacity of the economy has increased substantially in recent times as a result of the government's mega infrastructure drive, and that in turn, has significantly amplified the investment potential and opened up new avenues to be utilized by the private sector.

"The Monetary Board was of the view that it would now be appropriate to further encourage the utilization of this investment potential, since such policies by the government would give rise to increased and accelerated sustainable economic growth in the period ahead," the Central Bank said in a statement.

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