CB Chief assures to address rise in short-term interest rate

By Charumini de Silva 

Dr. Nandalal Weerasinghe

The Central Bank Governor Dr. Nandalal Weerasinghe yesterday assured to address the rise in short-term interest rates which was partly triggered by liquidity shortage in the market.

“As the first step to address the short-term interest rates, we will ease the interbank liquidity shortfall in the next few weeks,” he said speaking at a post-Budget forum organised by the Centre for Banking Studies yesterday.

He said the reluctance of inter-bank trading has led to the rupee liquidity shortfall in the banking system.

“Recent rise in short-term interest rates should turn around similar to the inflation turnaround,” he added.

The overall rate of inflation as measured by the Colombo Consumer Price Index (CCPI) in October saw its point-to-point decreasing for the first time in 13 months to 66% against its previous month of 69.8%, while its annualised average increased to 38.3% against 33.4%.

The core inflation (Y-o-Y), which reflects the underlying inflation in the economy decreased to 49.7% in October 2022 from 50.2% in September 2022, while annual average core inflation increased to 27.8% in October 2022 from 24.1% in September 2022.

Weerasinghe is hopeful that the market rates will also adjust as a result of the tight monetary policy adopted by the Central Bank.

“Now, we want those results to be passed on to the economy going forward,” he added.