CB says its stance is more towards easing monetary policy

Maintaining a contrary view to the IMF, the Central Bank Governor Nivard Cabraal yesterday said that going forward there was greater opportunity to an easing of the monetary policy than tightening.

“We maintain our stance as enunciated previously and there is likely to be more easing of the monetary policy than a tightening,” Cabraal told the Daily FT. “If you drill down the inflation data, there is greater comfort and control with regard to demand side inflation and therefore our policy stance would be more towards easing than keeping rates steady,” the Central Bank Chief added.



In its April monetary policy review Central Bank said both headline and core inflation has remained at single digit levels for 50 consecutive months. “Inflation is expected to remain at these benign levels supported by prudent demand management policies, although the proposed revisions to administered prices are likely to exert some upward pressure on price levels,” it said.

The Bank also said monetary policy measures taken so far indicate that expected results are being realised, providing reasonable stimulus for a higher economic growth. At the same time, further deceleration of demand driven inflation on a sustainable basis would provide space for further easing of monetary policy.

Last week it was announced that inflation, as measured by the Colombo Consumers’ Price Index (CCPI) (2006/07=100) decreased to 6.4% on a year-on-year (YoY) basis in April 2013 from 7.5% in the previous month. The inflation rate on an annual average basis remained unchanged at 8.8% in April 2013 as recorded in the previous month.

Core inflation on a YoY basis also decreased to 6.1% in April 2013 from 6.8% in the previous month while it increased marginally on an annual average basis to 6.5% in April 2013 from 6.4% in March 2013.