As widely expected, the central bank has kept its short-term interest rates on hold.

The bank left the one-week repo rate at 7.50% while it kept the overnight borrowing rate at 7.25%, and the overnight lending rate at 10.75%

The ongoing cautious monetary policy along with prudent fiscal and macroprudential policies continue to have a favourable impact on inflation, especially on core inflation indicators, however, recently elevated volatility in the exchange rates has limited the improvement in the core inflation, said the bank in a statement released after the monetary policy committee meeting on May 20.

The volatility in exchange rates, combined with the uncertainty in global markets and volatility in energy and food prices, makes it necessary to maintain the cautious stance in monetary policy, added the central bank.

Inflation expectations, pricing behaviour and other factors that affect inflation will be monitored closely and the cautious monetary policy stance will be maintained until there is a significant improvement in the inflation outlook, reiterated the central bank in the statement, also underlining that that future monetary policy decisions will be conditional on the improvements in the inflation outlook.

The favourable developments in the terms of trade and the moderate course of consumer loans contribute to the improvement in the current account balance, said the bank, adding that external demand remains weak, domestic demand contributes to growth moderately.

Last month, the bank lifted its inflation forecast for 2015 to 6.8% from a previous 5.5%, and it raised its 2016 inflation forecast to 5.5% from a previous 5%.