The Central Bank of Sri Lanka decided today to cut interest rates to spur credit demand and support economic recovery after the island suffered from the consequences of the financial crisis, besides civil war that lasted 26 years.
Sri Lanka's central bank cut the repurchase rate by 50 basis points to reach 7.50% from 8.00%, while it was expected to be kept at the same prior level. The bank also decided to lower the reverse repo rate by 75 basis points to reach 9.75% from 10.50%.
The bank said in its statement that it aims at spurring credit demand and supporting economic recovery after civil war led to severe deteriorations in economic conditions. The bank's decision also came to keep inflation below 10%, worth mentioning that consumer prices in the capital Colombo inclined 1.4% in October from a year earlier that is the fastest pace in five months.
However, today's decision came after the central bank cut the reverse repurchase rate to 10.5% in September and the repurchase rate o 8% as the economy needed more support from low interest rates to overcome the negative effect of the world recession. Yet, Sarath Amunugama the Deputy Finance Minister said that the government will maintain fiscal and monetary stimulus in 2010 to accelerate economic growth.
Mr. Nivard Cabraal the Central Bank Governor forecasted consumer prices to incline about 5% this year before it increase between 5% and 6% in 2010, while he ensured that there will be a room for more rate cuts if inflation remained at its low levels.
A for economic recovery, monetary policy makers expects it to be based on rebuilding the destroyed districts after the government defeated separatist Liberation Tigers of Tamil Ealam rebels as rebuilding projects will help to provide job opportunities and encourage public investments.
Finally, the central bank expected the economy to grow 3.5% this year before economic growth accelerate to 6% next year as the world economy is recovering and global demand continued to advance helping the nation's exports sector to pick up supporting economic growth.
Sri Lanka's central bank cut the repurchase rate by 50 basis points to reach 7.50% from 8.00%, while it was expected to be kept at the same prior level. The bank also decided to lower the reverse repo rate by 75 basis points to reach 9.75% from 10.50%.
The bank said in its statement that it aims at spurring credit demand and supporting economic recovery after civil war led to severe deteriorations in economic conditions. The bank's decision also came to keep inflation below 10%, worth mentioning that consumer prices in the capital Colombo inclined 1.4% in October from a year earlier that is the fastest pace in five months.
However, today's decision came after the central bank cut the reverse repurchase rate to 10.5% in September and the repurchase rate o 8% as the economy needed more support from low interest rates to overcome the negative effect of the world recession. Yet, Sarath Amunugama the Deputy Finance Minister said that the government will maintain fiscal and monetary stimulus in 2010 to accelerate economic growth.
Mr. Nivard Cabraal the Central Bank Governor forecasted consumer prices to incline about 5% this year before it increase between 5% and 6% in 2010, while he ensured that there will be a room for more rate cuts if inflation remained at its low levels.
A for economic recovery, monetary policy makers expects it to be based on rebuilding the destroyed districts after the government defeated separatist Liberation Tigers of Tamil Ealam rebels as rebuilding projects will help to provide job opportunities and encourage public investments.
Finally, the central bank expected the economy to grow 3.5% this year before economic growth accelerate to 6% next year as the world economy is recovering and global demand continued to advance helping the nation's exports sector to pick up supporting economic growth.
