By Shihar Aneez
(Reuters) - Sri Lanka's central bank will have room to raise interest rates by at least another 50 basis points if April trade and inflation data show signs of stabilizing, the treasury secretary said on Wednesday.
COLOMBO |
(Reuters) - Sri Lanka's central bank will have room to raise interest rates by at least another 50 basis points if April trade and inflation data show signs of stabilizing, the treasury secretary said on Wednesday."Since we have already raised policy rates by half a percent (in February), maybe another 50 basis points upward revision could stabilize the whole macroeconomic environment," P.B. Jayasundera told Reuters in a rare media interview a day ahead of the central bank's next policy-setting meeting.
"Right now is not the time. We must wait for the April data and look at the adjustments that have taken place, and then take a policy decision that will maintain the compatibility of the interest rate and the exchange rate."
Preliminary figures for April should be available to policymakers by early May.
Sri Lanka's trade deficit rose to nearly $966 million in January from a year earlier as global demand for Asia's exports weakened and as higher oil prices swelled its oil import bill.
Annual inflation, meanwhile, accelerated to a six-month high of 5.5 percent in March, well above analysts' expectations and amplified by a weak rupee and fuel price increases.
The island nation posted a record trade deficit of $9.7 billion last year, prompting the central bank to abandon increasingly costly attempts to intervene in foreign exchange markets to support the sliding rupee, moves which were heavily depleting the country's official reserves.
The rupee hit a record low of 131.60 to the U.S. dollar on March 19.
