The first monetary policy review by the Monetary Policy Board under the Central Bank of Sri Lanka Act, No. 16 of 2023 (CBA) was held on 04 October 2023.
In this review, the Board decided to reduce the Standing Deposit Facility Rate (SDFR) and the Standing Lending Facility Rate (SLFR) of the Central Bank by 100 basis points (bps) to 10.
00 percent and 11.00 percent, respectively.
"The Board arrived at this decision following a careful analysis of the current and expected developments, including low inflation and benign inflation expectations in the domestic economy, with the aim of stabilising inflation at the envisaged 5 percent level in the medium term, thereby enabling the economy to reach its potential growth," the Central Bank said in a statement.
"The Board expects that this reduction of policy interest rates, along with the significant easing of monetary policy effected previously, including the directions issued by the Central Bank to licensed banks to reduce interest rates, and the significant reduction of risk premia on government securities, would accelerate the downward adjustment in market interest rates, particularly lending rates, in the period ahead."
The financial sector is urged to pass on the benefits of the continued easing of monetary conditions to individuals and businesses adequately and swiftly, thereby supporting the envisaged rebound of the economy.
The Sri Lanka rupee recorded an appreciation of around 12 percent against the US dollar thus far during the year.
The level of gross official reserves was estimated at around US dollars 3.
5 billion as at end September 2023, including the swap facility from the People’s Bank of China.