Central Bank’s new spin in the market?

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Colombo money brokers are in a tizzy at the moment and are questioning the Central Bank’s decision to cut policy interest rates by 50 basic points.  They say this is a surprise move that is going against market dynamics, since there was sufficient credit growth in the market in the midst of a low inflationary environment.

Therefore, the question in everyone’s mind is whether this is another highly sophisticated spin like the bond issue, which recently came under close investigation, finally causing enough pressure for the CID to question Central Bank Governor Arjuna Mahendran.
Analysts have now turned their focus on certain areas of the money market, to see who is to gain from this sudden move by Central Bank.  Is there a hidden hand manipulating the policy of  Central Bank to create unique opportunities for some unscrupulous dealers to make a fast buck?

With all indications pointing to the government being dissolved by the end of the month and fresh elections called shortly afterwards, the question arises whether there are some who want to make hey while the sun shines?  There is a counter theory to this, which says that by the reduction of interest rates, the stock market could become a more interesting investment option; thereby boosting the share market to give a rosy picture of the economy.

However, political analysts say that this may not be the case as Central Bank under the Yahapalanaya Government was expected to be apolitical.

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