Sri Lanka Central Bank cuts policy interest rates by 50bp

Sept 11, 2009 (LBO) - Sri Lanka's Central Bank said it had decided to reduce policy interest rates by 50 basis points each from Friday with the repurchase rate to be 8.00 percent and reverse repurchase rate 10.50 percent. It said in a statement its Monetary Board decided to cut rates as inflation was low and to encourage further reductions in market interest rates which had not fallen as much as desired by previous policy rate cuts.

"Today’s decision by the Central Bank to further reduce its policy interest rates would signal to the market the need for further reductions in market interest rates and expansion in credit to the private sector," it said.

The Central Bank said that during the first six months of the year it had eased its monetary policy stance in several steps to support domestic economic activity.

This was in response to the sharp fall in inflation, the improved outlook for inflation and the significant slowdown in domestic economic activity in the face of the global economic downturn.

"With the gradual relaxation of the monetary policy stance of the Central Bank, though short term interest rates have declined in line with the policy rate reductions, there has not been an appreciable