Sri Lanka makes surprise rate cut to boost growth

Dec 12 2012, 16:45 IST
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sri lanka economy (reuters) sri lanka economy (reuters)
SummaryLanka also adopted a flexible exchange rate policy as part of a strategy to counter a balance-of-payments deficit.

from a record 8.3 percent in 2011.

The bank also announced that a rule restrcting commercial banks credit annual growth to 18 percent, that was brought in last year, would be ditched at the end of this month.

The bank said it expected the private sector credit growth to have decelerated to around 19 percent year-on-year from a near 16-year high of 35 percent in March.

Samatnha Amarasinghe, an economist with Standard Chartered Bank in Colombo, expected further rate cuts, but with inflation still at high levels she expected the central bank to wait at least a few months.

"We may not see cuts in the first quarter again, but we expect another 50 basis points next year," she said.

The rate cut had little impact on the share market, while the rupee currency was barely changed at 128.75/80 per dollar. Just a tad firmer than Tuesday's close of 128.80/90.

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