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* Sri Lanka maintains policy rates, current monetary policy appropriate
Tue, May 20, 2014, 09:20 am SL Time, ColomboPage News Desk, Sri Lanka.

May 20, 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 Tuesday.

Low inflation at 4.9 percent in April 2014 and favorable inflation outlook were the key factors in the Bank's decision to maintain the policy rates, the Central Bank said.

Inflation is projected to remain benign in the months ahead, supported by favorable expectations although weather related supply disruptions could cause some marginal variation in the behavior of certain food items, the Bank cautioned.

Sri Lanka's trade deficit contracted by nearly 12 percent for the first quarter 2014 boosted by high export trade volumes recorded in March 2014.

Export earnings in March surpassed US$ 1 billion recording a significant 28.6 percent growth compared to the same period in previous year.

The Bank expects the outlook for export earnings to remain positive as advanced economies recover in the months ahead.

As at end March 2014, gross official reserves were at US$ 8.1 billion.

Public corporations continued to settle their liabilities to the banking sector, with total reduction in credit to public corporations during the first three months of the year amounting to Rs. 35.1 billion.

Considering the developments, the Monetary Board has decided to keep the rates steady atc current levels.

The Bank expects commercial banks to pass the benefit of the eased monetary policy stance to borrowers without further delay.

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