Central Bank Of Sri Lanka’s Economic Research Department has released the “Sri Lanka’s Monetary Policy Review – May 2010″. The improvements on the supply chain have like the rice production in the past Maha season has dampened the price pressure. Colombo Price Index has fallen to 5.8% in April 2010. Private sector credit expansion was also noted. The Monetary Board decided to maintain the policy interest rates of the Central Bank unchanged.
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Monetary Policy Review – May 2010
Inflation, as measured by the year-on-year change in the Colombo Consumers’ Price Index (base=2002) declined to 5.8 per cent in April 2010 while annual average inflation increased marginally to 3.4 per cent. Price pressures in the economy have been dampened by improvements on the supply side, particularly the noteworthy performance in paddy production in the Maha season. Prices of key commodities in the international markets also remain subdued, reducing price pressures in the near term.
Developments in the monetary sector have been encouraging. Credit obtained by the private sector, which contracted since April last year, on a year-on-year basis, has begun to improve and indicates a positive growth in March 2010. This development is attributable to the easing of monetary policy as well as improving financial conditions and the resulting downward adjustment in market interest rates. The gradual expansion in credit obtained by the private sector indicates the solidifying recovery in the economy. Meanwhile, growth in broad money moderated to 17.1 per cent, year-on-year, by March 2010, from 18.6 per cent at end 2009. Accordingly, broad money growth remains compatible with the levels targeted in the monetary programme announced at the beginning of the year.
Taking into consideration the above developments, the Monetary Board, at its meeting held on 19 May 2010, decided to maintain the policy interest rates of the Central Bank unchanged.
The release of the next regular statement on monetary policy will be on 16 June 2010.