Central Bank decides to maintain policy rates

The Monetary Board of the Central Bank of Sri Lanka (CBSL) has decided to maintain the Standing Deposit Facility Rate (SDFR) and the Standing Lending Facility Rate (SLFR) of the Central Bank at their current levels of 14.50 per cent and 15.50 per cent, respectively. 

In arriving at this decision, at its meeting held on 17 August, the Board considered the latest model-based projections, which point towards a larger than expected contraction in activity and a faster than expected easing of price pressures, compared to the previous monetary policy review, a statement said. 

Contractionary monetary and fiscal policies already in place, alongside the measures to curtail non urgent import expenditure, are expected to result in a notable contraction in credit to the private sector and possible upside risks to unemployment in the near term. 

The Board was of the view that despite headline inflation is projected to remain elevated in the near term, the policy measures taken by the Central Bank and the Government thus far would help contain any aggregate demand pressures, thereby anchoring inflation expectations, along with the anticipated decline in global commodity prices and its passthrough to domestic prices in the period ahead.

The Board was of the view that the effective market interest rates are notably high and policy measures that have already been implemented by the Central Bank would continue to be further transmitted to the overall economy. 

The Central Bank says it would continue to monitor domestic and global macroeconomic and financial market developments and stand ready to take appropriate measures proactively to stabilise inflation at the desired range and help reinforce greater macroeconomic stability in the period ahead.