According to the Department of Census and Statistics (DCS), the Sri Lankan economy is estimated to have grown by 6.7 per cent during the second quarter of 2015, recording a growth rate of 5.6 per cent for the first half of 2015 compared to 1.3 per cent recorded in the corresponding period of 2014. Economic growth during the second quarter has been largely supported by the improved performance in the Services sector along with positive contributions from the Industry and Agriculture sectors.

Taking the above developments in the economy into consideration, the Monetary Board decided to hold key interest rates unchanged, the Monetary Policy Review Statement issued by the Economic Research Department of the Central Bank revealed.

The gross official reserves, which stood at 6.8 billion dollars at end July, are estimated o have decreased to 6.4 billion dollars by end August. However, official reserves are expected to increase during the remainder of the year with the expected long term external financial flows to the government, the statement said.

The trade deficit narrowed in July, and a seven percent depreciation of the rupee so far this year would further support the current account, it said.

Core inflation increased to 3.9 per cent in August 2015 on a year-on-year basis, from 3.5 per cent in the previous month.

“Headline inflation is expected to remain comfortably within 2.0-3.0 per cent by year end, supported by improved domestic supply conditions and subdued global commodity prices,” the monetary authority said.