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ECONOMYNEXT - Sri Lanka has held its main policy rate at 8.5 percent in June amid global jitters, which has triggered outflows from capital markets, the central bank said, with inflation ticking up slightly.
"Short term interest rates increased recently responding to the prevailing deficit liquidity conditions in the domestic money market," the central bank said. "Yields of short term government securities displayed mixed movements in the recent past, while other market interest rates appear to have stabilised at elevated levels.
"While appropriate open market operations will address short term liquidity concerns, it is expected that nominal and real interest rates would gradually adjust downwards in line with the neutral policy stance of the Central Bank and the prevailing low inflation environment."
After loosening policy in April, the central bank has kept a fairly tight leash on money markets amid international jitters, with the dollar strenghtening. Liquidity shortages also develop when the central bank defends the currency.
In April and May private credit was posiitve, though lower than the sudden spike seen in March.
"Short term interest rates increased recently responding to the prevailing deficit liquidity conditions in the domestic money market," the central bank said. "Yields of short term government securities displayed mixed movements in the recent past, while other market interest rates appear to have stabilised at elevated levels.
"While appropriate open market operations will address short term liquidity concerns, it is expected that nominal and real interest rates would gradually adjust downwards in line with the neutral policy stance of the Central Bank and the prevailing low inflation environment."
After loosening policy in April, the central bank has kept a fairly tight leash on money markets amid international jitters, with the dollar strenghtening. Liquidity shortages also develop when the central bank defends the currency.
In April and May private credit was posiitve, though lower than the sudden spike seen in March.
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