CB seen keeping policy rates steady amid political crisis

„Rates to be steady despite heavy pressure on rupee from political crisis

„Analysts believe political uncertainty is too intense to go for rate hike

„Rupee hit fresh low of 175.90 per US dollar on Monday

The Central Bank is expected to leave its key interest rates steady today, despite heavy pressure on the rupee from a deepening political crisis, a Reuters poll showed.

President Maithripala Sirisena fired Prime Minister Ranil Wickremesinghe last month and appointed a pro-china former president, Mahinda Rajapaksa, in his place.

The Sri Lankan rupee hit a fresh low of 175.90 per dollar on Monday while the island-nation’s dollar bonds have also plummeted as foreign investors sell their holdings. The rupee has fallen more than 11 percent in the last six months.

While most analysts said they would normally expect a rate hike under such circumstances, they believe the political uncertainty is too intense to risk a blow to economic growth.moreover, a tightening may provide only a brief respite for the rupee as the crisis looks set to drag on.eight out of 12 economists surveyed expected the Central Bank to keep both its standing deposit facility rate (SDFR) and standing lending facility rate (SLFR) to be left at 7.25 percent and 8.5 percent respectively. It cut SDFR by 25 bps in April.

Two economists expected a 25 basis point (bps) increase in both SDFR and SLFR, while one expected a 50 bps hike in both. One analyst expected a 50 bps increase in SLFR.