StanChart expects CB to maintain status quo

Standard Chartered Global Research in an economic alert yesterday said the Central Bank is likely to maintain the status quo at its March 4 monetary policy meeting amid inflationary pressures. 

“While inflationary pressures have risen, especially due to the recent surge in oil prices for geopolitical reasons, we think the Central Bank will be motivated to keep rates on hold, given growth concerns amid the ongoing uncertainty,” StanChart said.

However, the bank brought forward its rate hike expectation to the second and third quarters of this year, from the second and fourth quarters previously, as the Central Bank is expected to strike a fine balance of risks arising from higher inflation and external sector weaknesses.  StanChart also revised its inflation forecast for Sri Lanka to 9.5 percent in 2022, from 7.5 percent, with inflation set to average 12 percent in first half before easing to 7 percent in second half. “Inflation should ease in H2 on base effects but remain above the Central Bank’s target of 6 percent in 2022,” the global bank said.

StanChart also said there is a high likelihood of domestic fuel prices being hiked sharply by over 10 percent in the near term, given higher crude oil prices, which are expected to lead to greater inflationary pressure.