In its Monetary Policy Review for this month (February) CBSL said that market interest rates continue to decline in response to the monetary policy measures taken by the Central Bank.

It also said that the annual average inflation declined to 3.1 per cent by January 2010, although inflation increased to 6.5 per cent in January 2010 from 4.8 per cent at end 2009. The gradual increase in year-on-year inflation mainly reflects the dissipation of the base effect as well the recovery in commodity prices globally.

The Central Bank has already relaxed its monetary policy stance in the course of the year 2009 in order to support economic activity.

his was made possible by the deceleration in inflation and the favourable outlook for inflation that prevailed. In response, market interest rates are adjusting downwards. Credit obtained by the private sector, which was negatively impacted by the slowdown in economic activity domestically as well as globally has been increasing in nominal terms towards the end of the year 2009.