Sri Lanka Central Bank to Give Guidance to Market, Cabraal Says

By Anusha Ondaatjie

Sri Lanka's central bank plans today to give ``some guidance'' to the market amid a global stocks rout prompted by the rejection of a $700 billion bank rescue plan by U.S. lawmakers, Governor Nivard Cabraal said.

``We are monitoring the global situation and after looking at our inflation numbers today, there are some responses we will be making,'' Cabraal said in a telephone interview from Colombo.

The U.S. House of Representatives rejected the legislation yesterday in a 228 to 205 vote, sending the Dow Jones Industrial Average tumbling 778 points for its biggest point drop ever and extending the worst global sell-off in 21 years. Senators say they have no choice but to revive the measure, which is designed to restore confidence in the U.S. banking system.

``The bailout package will have to come as the risk is far too great for the U.S. to go without it,'' Cabraal said. ``The markets shouldn't act in such a panic.''

The Sri Lankan central bank plans to make an announcement later today after the statistics department reports September's inflation rate, Cabraal said.

``Overall we have seen the market reaction to our monetary policy with inflation easing,'' the governor said. ``We will also want to let them know the expectations going forward.''

Consumer prices in the capital Colombo rose 24 percent in September from a year earlier, after increasing 24.9 percent in August, according to the median estimate of nine analysts in a Bloomberg News survey. The statistics department will announce the figure at 3:00 p.m. local time today.

Sri Lanka policy makers have kept monetary policy tight by reducing the amount of funds in the banking system.

The central bank this month said rising food production and easing global commodity markets, along with ``demand-management measures,'' will help further ease price pressures after inflation slowed for a second month in August.