Thursday, 19 September 2013 00:00
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Governor sees no impact from any Fed stimulus cut
CB leaves interest rate on hold
Monetary policy ‘more towards relaxing’: Governor
Reuters: Sri Lanka’s economy can grow more than 7.5% next year and it won’t be hurt by any reduction in monetary stimulus by the US Federal Reserve, the island’s central bank governor said on Tuesday. Ajith Nivard Cabraal told the Reuters Global Markets Forum that “growth for 2014 is expected to be over 7.5%”.
Earlier on Tuesday, the Central Bank kept policy rates unchanged and said the country has the potential to achieve its targeted 7.5 economic growth this year.
Sri Lanka’s growth rate hit a record 8.2% in 2011 before slowing to 6.4% last year.
Cabraal described the Central Bank’s monetary policy stance as “more towards relaxing than tightening”.
The prospect that the Fed will start cutting its bond-buying at its two-day meeting which starts later on Tuesday has caused capital outflows from many emerging countries.
Cabraal said Sri Lanka had been “cautious in absorbing QE (quantitative easing) funds” and, because it has had a stable market environment, “we are ready to face the Fed tapering”.
Sri Lanka’s rupee weakened about 10% in 2012 and this year has depreciated about 3.6%.
“Our currency has been stable even in the light of turbulent upheavals in many other currencies in recent times,” Cabraal said.
He said a Fed decision to taper its stimulus would indicate a strong recovery in the United States, Sri Lanka’s main export destination. “If the US is stopping QE, that’s one of the better signs for the world,” the Governor said, adding that a stronger global recovery would “help us to maintain a reasonably strong growth momentum next year.”
