Accordingly, the Standing Deposit Facility Rate (SDFR) and the Standing Lending Fcility Rate (SLFR)would remain at 6.50 per cent and 8.00 per cent respectively, the Central Bank announced Tuesday releasing the monetary policy review for February 2015..
Statutory Reserve Ratio (SRR), the commercial banks' deposit requirement remains at 6.00 percent.
Year on Year inflation increased to 3.2 percent in January 2015 from 2.1 percent in December 2014 while annual average inflation declined marginally to 3.2 percent from 3.3 percent recorded in the previous month.
The increase in inflation in January is attributed to higher food prices, which have now broadly stabilized, the Banks said.
The Central Bank expects the impact of the recent downward price revisions of domestic petroleum prices as well as of essential consumer items to reflect in official price indices from February and accordingly a considerable downward shift in inflation.
Accordingly, it is expected that inflation, which has registered single digit rates in the post-conflict period, will continue to remain comfortably low in 2015.
In December 2014, credit extended to the private sector by commercial banks grew by 8.8 percent on a year-on-year basis, maintaining its upward trend since August 2014. In absolute terms, credit obtained by the private sector recorded a historic high of Rs.76.5 billion during the month of December, resulting in a cumulative increase in private sector credit of Rs.223.9 billion during 2014.
With low nominal interest rates and improving business confidence, the Central Bank expects the credit extended to the private sector would grow at a healthy pace in 2015.
The rupee depreciated against the US dollar by 1.4 percent by 20 February 2015 year-to-date, mainly due to higher import demand.
"With this seasonal demand gradually easing and the realization of the anticipated foreign investment inflows, it is expected that the external sector would show greater resilience during the remainder of the year," the Central Bank said in its policy review.
