Sri Lankan Central Bank Leaves Interest Rate Steady At 10.5% []

8/14/2007 6:34:04 AM The Central Bank of Sri Lanka left its benchmark repurchase rate steady at 10.5%, the bank's communication department said Tuesday. Inflation Off Its PeakAn accompanying statement said that inflation, which was easing in recent months, rose in July, due to the revisions in administered prices.The bank said the Colombo Consumer Price Index -CCPI rose 17.6% on a point-to-point basis in July, compared to a 13.0% increase in the previous month. This has taken the annual average CCPI to 17.2% up from 17.0% a year ago. The three interest rate hikes since September 2006 by the central bank brought down the annual inflation from its decade high of 20.5% registered in January.The bank observed that the country's external sector performed well during the first half year reflecting both higher trade and financial inflows. Export earnings grew 12.9% in June to US$675 million, the highest monthly value in 2007, while imports declined 11.5%. Remittances from Sri Lankan overseas workers, the second highest foreign exchange earner to the country, increased 18.0% to US$1.3 billion in the first half year. This helped to finance over 80% of the trade deficit, the report said.Tight Policy OutlookThe bank said that external trade resulted in a cumulative surplus of US$161 million till July, while the gross official reserves amounted to US$2.7 billion. The central bank expected the external sector to continue do well with increased inflows to the government as well as to the private sector, following the recent upward revision of Sri Lanka's credit rating outlook to ‘Stable' from ‘Negative' by Standard & Poor's.The tight monetary policy, the bank thought will continue to subside the demand driven inflation and would also help achieve the reserve money targets by the end of the year.