The Central Bank (CB) said this week that with inflation falling it has decided to reduce the CB’s Repurchase and Reverse Repurchase rates by 25 basis points to 10.25 % and 11.75 %, respectively.
Inflation would fall to a single digit in February 2009 and continue its decline in the coming months, the CB said in a press release.
In its monthly monetary review, the Bank said inflation has been on a path of rapid deceleration, benefiting from the absence of upward pressures from international commodity prices and supported by the tight demand management policies put in place by the CB. Inflation, as measured by the year-on-year change in the Colombo Consumers’ Price Index, dipped to 10.7 % January 2009 from 14.4 % in December 2008.
“The positive developments in inflation dynamics have been further supported by the deceleration observed in monetary aggregates.
So far during the first quarter 2009, reserve money has remained well within the target, minimising any risk of demand driven inflationary pressure,” it said adding that taking this into consideration the Monetary Board, at a meeting on Tuesday, decided to reduce the CB rates.
The Board also decided to reduce the penal rate of interest charged on reverse repurchase transactions with the CB by 50 basis points to 16.50 % with immediate effect.
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