The Standing Deposit Facility Rate (SDFR) and Standing Lending Facility Rate (SLFR) of the Central Bank have been reduced by 100 basis points (bps) to 10.00% and 11.00%, respectively, by the Monetary Policy Board of the Central Bank of Sri Lanka (CBSL).
On Wednesday, October 4, the Monetary Policy Board conducted its first monetary policy review under the Central Bank of Sri Lanka Act, No. 16 of 2023 (CBA).
According to a press release from the CBSL’s Economic Research Department, the decision to reduce the SDFR and the SLFR was made after a careful analysis of the current and anticipated developments, including low inflation and favourable inflation expectations in the domestic economy, with the goal of stabilising inflation at the anticipated 5% level in the medium term and enabling the economy to achieve its potential growth.
The Monetary Policy Board anticipates that this decrease in the policy interest rate, along with the previous significant easing of monetary policy, which included the Central Bank’s instructions to licenced banks to lower interest rates, and the substantial decline in risk premia on government securities, will hasten the downward adjustment in market interest rates, particularly lending rates, in the coming months.
The banking sector has been asked to effectively and quickly transfer the positive effects of the ongoing loosening of monetary conditions to people and businesses, supporting the anticipated recovery of the economy.
