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* Sri Lanka maintains policy rates, current levels appropriate
Wed, Jun 18, 2014, 09:07 am SL Time, ColomboPage News Desk, Sri Lanka.

June 18, 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 level of policy interest rates 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 8.00 percent, the Central Bank announced Wednesday.

Notable economic growth of 7.6 percent in the first quarter of the year combined with the low inflation at 3.2 percent in May 2014 and favorable inflation outlook were the key factors in the Bank's decision to maintain the policy rates, the Central Bank said.

The economic growth of 7.6 percent registered in the first quarter of 2014 was notably higher than the growth of 6.1 percent recorded in the corresponding period of the previous year.

The growth in the economy was led by contributions from the Industry and Services sectors although a slowdown was observed in the Agriculture sector owing to adverse weather conditions, the Bank said in its economic policy review for the month of June..

The Bank expects the growth momentum to continue during the remainder of the year with improved global economic conditions and expected improvements in domestic credit conditions and the economy will achieve the envisaged growth of 7.8 per cent for 2014.

Month of May recorded the lowest inflation since February 2012 with the core inflation declining to 3.3 percent in May and the Central Bank expects the inflation to remain in mid-single digits during the year.

The external trade continued to remain buoyant during April 2014 as expenditure on imports declined modestly resulting in a further contraction in the trade deficit.

Inflows from workers' remittances remained robust alongside a significant increase in earnings from tourism reflecting the continued influx of tourists, according to the Central Bank.

On account of these developments, together with the inflows from the proceeds of the seventh international sovereign bond in mid April 2014, gross official reserves as at end April 2014 strengthened further to its highest level of US$ 8.9 billion, the Bank said.

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