Sri Lanka central bank further reduces interest rates

The Central Bank of Sri Lanka has decided to reduce its Standing Deposit Facility Rate (SDFR) and the Standing Lending Facility Rate (SLFR) by 100 basis points to 9.00 percent and 10.00 percent, respectively, it said in a statement on Friday.

The central bank said its monetary policy board arrived at this decision following a careful analysis of the current and expected developments in the domestic and global economy, with the aim of achieving and maintaining inflation at the targeted level of 5 percent over the medium term, while enabling the economy to reach and stabilize at the potential level.

“The board took note of possible upside risks to inflation projections in the near term due to supply-side factors stemming from the expected developments domestically and globally.

However, the board viewed that such near-term risks would not materially change the medium-term inflation outlook, as inflation expectations of the public remain anchored and economic activity is projected to remain below par in the near to medium term,” the central bank said.

The board took the view that with this reduction of policy interest rates, along with the monetary policy measures carried out since June 2023, sufficient monetary easing has been effected in order to stabilize inflation over the medium term, said the central bank.

Sri Lanka increased its interest rates significantly in 2022 to deal with rising inflation. The rates have been reduced several times in 2023.