Sri Lanka’s central bank is keeping interest rates stable, saying market interest rates should fall


COLOMBO, Nov 24 (Reuters) – The central bank of Sri Lanka held interest rates steady on Thursday, as widely expected, but said it expects a cut in market interest rates in line with current policy rates.

The revolving loan rate (LKSLFR=ECI) remained unchanged at 15.50%, while the revolving deposit facility rate (LKSDFR=ECI) remained unchanged at 14.50%.

“The Council believed that the prevailing tighter monetary policy stance is necessary to curb any underlying demand pressures in the economy,” the central bank said in a statement.

It reads: “If the adjustment to a reasonable fall in market interest rates is inconsistent with the intended deflationary path, the central bank may be required to take administrative action to prevent any improper movement in market interest rates.” Will be forced.”

13 out of 15 economists and analysts surveyed by Reuters had predicted that the central bank would leave interest rates unchanged as it waited for the effects of its previous hikes to trickle down to prices and the wider economy.

To combat inflation, CBSL raised rates by a record 950 basis points this year.

The island nation has been struggling with low foreign exchange reserves for most of the year and is struggling to afford essential imports. Reduced import supply has driven up inflation. There has been a huge fall in the currency.

CBSL expects the economy to contract by 8.7% this year, the worst decline in an entire year.

“A gradual but sustained recovery in economic activity is expected, driven by the target of improving supply conditions, improving market confidence and the impact of corrective policy measures being taken to stabilize economic conditions,” the statement said. hopefully.”

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Sri Lanka, which defaulted on its external debt in May, reached a preliminary IMF deal for a $2.9 billion bailout in early September. However, the country needs to put its massive debt on a sustainable path before the payouts can begin.

Reporting by Swati Bhat and Udita Jayasinghe; Edited by Muralikumar Anantharaman

Our Standards: The Thomson Reuters Principles of Trust.




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