Exclusive-Sri Lanka central bank sees no need for further rate hikes this year, governor says

Colombo, Aug 11 - Sri Lanka's central bank does not anticipate any further interest rate hikes this year, following its surprise 100 basis-point increase in May, according to Governor P. Nandalal Weerasinghe. The inflation rate is expected to stabilize around current levels next year, before easing, but the bank will remain vigilant for any unexpected developments, Weerasinghe told Reuters.

The May rate hike was a proactive measure taken to curb inflation, which reached 7.3 percent in July, driven by rising energy prices due to the Iran war. Weerasinghe stated that the bank will adjust monetary policy only if there is a deviation from the initially expected inflation path. He expects inflation to return to the central bank's 5 percent target in the first half of next year.

The central bank's next interest rate decision is set for September 30. Analysts suggest that the May rate hike may have jeopardized Sri Lanka's fragile, IMF-backed recovery.