|
BY
ASHA JAVEED
By next week, banks’ interest rates will move from 9.75
per cent to 10 per cent. That’s the prediction by Larry
Howai, president of the Banker’s Association following,
the Central Bank’s decision to move the rate from six
per cent to 6.25 per cent yesterday.
The repo rate is the rate at which one bank can borrow from
another.
Howai said the bank’s decision would reduce the amount
of borrowing in the system and hopefully clamp down on inflation.
He noted that the Central Bank was moving very aggressively
to mop up liquidity and being pro-active in managing inflation.
The Central Bank said that headline inflation rose to 7.2
per cent in the 12 months to December 2005 compared to 7.0
per cent in November 2005 and 5.6 per cent in 2004.
Howai explained that inflation eroded the wealth of fixed-income
earners and this was the main concern for the Central Bank.
The bank recently withdrew $1 billion from the system and
placed it in special deposit which earns four and a half per
cent interest.
The repo rate was increased four times last year, each by
25 basis points — in March, July, September and November.
The Central Bank raised the rate to 5.25 per cent, 5.50 per
cent, 5.75 per cent and 6.0 per cent, respectively.
The Central Bank said food prices continued to drive headline
inflation, with the price of fruits increasing by 27 per cent
and vegetables rising by 72.9 per cent.
Samaroo Dowlath, president of National Agriculture Marketing
and Development Corporation (Namdevco) said food prices were
unpredictable at this point, especially the effect they would
have on inflation.
He said there were external circumstances, such as the weather,
which caused food prices to increase.
“If
there are floods we will have a shortage and we know the effect
this will have. A lot depends on the weather right now. The
farmers have already planted out,” he said.
|
