Review of monetary policy 1-2017

A contribution of food and non-food inflation, inflation, as measured by the annual change in the Consumer Price Index of Colombo (CPI, 2013 = 100) increased by 5.5% In January 2017 from 4.5% in December 2016. core inflation on the basis of the CPI, also accelerated to 7% in January 2017 from 5.8% in December 2016. basic inflation and l 'Core inflation based on the national consumer price index (CPI 2013 = 100) is available with a delay, it also reflects an upward trend in December 2016, registering 4.2% and 6.7% , Respectively, on an annual basis. Despite rising inflation in recent times, which is mainly due to the impact of fiscal adjustments and adverse weather conditions, inflation is expected to remain in the mid-single digits on average over Of the year, demand management policies.

Meanwhile, widespread private sector credit growth by commercial banks remained high at 21.9 per cent by the end of 2016. Although credit growth has slowed somewhat since the peak of 28.5 per cent Seen in July 2016, credit disbursements in absolute terms remain high despite significant upward adjustments in nominal and real interest rates. Mainly due to growth in credit to the public and private sectors, broad money growth (M2b) is maintained at a high level of 18.4 percent over one year, by the end of 2016 expected growth of aggregates Monetary and credit would gradually moderate during 2017 at a level consistent with real economic growth and expected inflation half-single digits.

In the external sector, the accumulated trade deficit increased to $ 8,200 billion in the first eleven months of 2016, by $ 7,600 million in the corresponding period in 2015 due to higher import costs , Export earnings. Tourism receipts and remittances continued to mitigate the negative impact of the trade deficit on the overall balance of payments. Tourism receipts are estimated to have increased by 14.0 per cent to about $ 3,400 billion in 2016, while workers' remittances increased by 3.7 per cent to $ 7.2 billion over Year. The realization of foreign direct investment (FDI) flows was below expectations in the first nine months of the year, when there was a certain market for government securities denominated in rupees of foreign investment outflows. Gross official reserves were estimated at 5.5 trillion at the end of January 2017, compared with 6,000 million US dollars at the end of 2016. Reflecting the external sector, the Sri Lanka rupee, which is depreciated by 3.8 per cent Against the dollar in 2016, has also been depreciated by 0.5 per cent until 2017.

In view of the above, the Monetary Council, at its meeting held on 6 February, 2017, stated that the economy is gradually responding to the stabilization measures taken by the Central Bank and the Government since the end of 2015. However, , It is necessary in the future, in order to take further corrective measures, if necessary. The Council also considered that, at this stage, the central bank's monetary policy stance is appropriate and decided to maintain the Bank's permanent deposit rate (SDFR) and the Bank's permanent lending rate (SLFR) Unchanged 7, 00% and 8.50% respectively.








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