The Standing Deposit Facility Rate (SDFR) and Standing Lending Facility Rate (SLFR) of the Central Bank have been reduced by 200 basis points (bps) to 11% and 12%, respectively, by the Monetary Board of the Central Bank of Sri Lanka (CBSL).
In order to allow the economy to reach its full potential and stabilize inflation at mid-single digit levels in the medium term, the Board made this decision at its meeting on Wednesday, July 5, after carefully analyzing the current and expected developments, including the faster-than-anticipated disinflation process and favorable inflation expectations in the domestic economy, the CBSL said.
The Board anticipates that the market interest rates, in particular lending rates, will adjust downward adequately and quickly as a result of this reduction in policy interest rates by 200 basis points, the reduction in policy interest rates by 250 basis points in early June 2023, as well as the recent significant reduction in risk premia on government securities.
The statement read: “Therefore, the banking and financial sector is encouraged to pass on the benefits of this material easing of monetary policy by the Central Bank to individuals and businesses, thereby supporting economic activity to rebound in the period ahead.”
