Sri Lanka central bank holds interest rates

Feb 08, 2011 (LBO) - Sri Lanka's central bank held key interest rates unchanged at its monthly monetary policy meeting Tuesday, saying inflation was stable and food prices likely to fall when supply returns to normal. The bank is ready to take "appropriate measures" to ward off any increase in prices of key commodity imports such as cuts in import duties and taxes as done recently, it said.

With the global economy recovering faster in 2011 than previously expected, export earnings are likely to improve further but the demand for key commodities could also impact prices.

"Appropriate measures will continue to be taken to contain the effect of any such developments," the central bank said.

"Certain recently implemented fiscal measures, such as the duty waiver granted for customs import duty on petrol and the reduction in taxes on importation of milk powder, would reduce the upward price pressures arising from adverse international commodity prices."

Overall, the bank said, the expected improvements in the fiscal sector are likely to ease pressure on domestic prices in the medium term.

The bank said that inflation, as measured by the change in the Colombo Consumers’ Price Index has remained 'br