Sri Lankan shares pared early gains to end little changed on Thursday, after the country’s central bank held interest rates steady as widely expected and indicated that inflation could peak next month.

The Central Bank of Sri Lanka (CBSL) held rates steady while its governor said foreign exchange reserves were on the mend and runaway inflation could peak as early as September.

CBSL Governor Nandalal Weerasinghe, however, said the economy was likely to contract 8% this year and growth was not likely until the second half of 2023.

The CSE All-Share index rose as much as 1.28% in the session before settling up 0.04% at 8,910.57.

The index is up 15.3% so far this month, but has lost 27% this year.

The central bank kept the Standing Lending Facility rate at 15.50% while the Standing Deposit Facility Rate remained at 14.50% as predicted.

Earlier this week, President Ranil Wickremesinghe’s media office said a state of emergency imposed in the middle of last month would not be extended beyond this week as protests against the country’s economic devastation petered out.

Sri Lankan shares fall as industrials weigh, rate decision in focus

Lender LOLC Development Finance was the top boost to the CSE All Share index, surging 18.5%, while Sri Lanka Telecom soared nearly 25%.

Trading volume slipped to 115.7 million shares from 129.1 million shares in the previous session.

The equity market turnover was 2.72 billion Sri Lankan rupees ($7.66 million), according to exchange data.

Foreign investors were net buyers in the equity market, purchasing 147.8 million rupees worth of shares, while domestic investors were net sellers, offloading 2.66 billion rupees worth of shares, the data showed.