Central Bank seen keeping rates steady

Friday, 25 September 2015 01:27 - - {{hitsCtrl.values.hits}}

Reuters: The Central Bank is expected to keep its policy interest rates unchanged at record lows on Friday, a Reuters poll found.

Nine out of 11 analysts surveyed said they expect the Central Bank to leave the standing deposit facility rate (SDFR) at 6.00% and the standing lending facility rate (SLFR) to remain at 7.50%.

All 11 analysts polled expected the statutory reserve ratio (SRR) for commercial banks to remain at 6.00%.

One analyst expected the central bank to raise the standing deposit facility and standing lending facility rates, given heavy Government borrowing and a rise in the market interest rates.

Another analyst expected the central bank to cut the deposit and lending facility rates by 50 basis points, though they predicted the central bank will keep the reserve rate steady.

The International Monetary Fund last week said that the key policy rates were not “necessarily inappropriate”.

“We don’t see additional room for rate cutting,” Todd Schneider, the chief of the IMF mission to Colombo, told reporters last week.

Private sector credit growth hit a near three-year high of 19.4% on year, and the Central Bank last week imposed a 70% limit on loans and advances for vehicles to curb credit issuance.

The Central Bank in April surprised markets with a 50 basis point rate cut to boost economic growth. Until April, rates had been steady for 14 months.

Despite policy rates at record lows, market interest rates have been on the rise since May following heavy local borrowing by the Government. The benchmark 91-day T-bill yield is hovering around a six-month high.