The Central Bank of Sri Lanka left the standing lending facility rate at 10%. — Bloomberg
COLOMBO: Sri Lanka’s central bank keeps its benchmark rate unchanged for the first time in five months as the economy gradually rebounds and inflation starts to pick up.
The Central Bank of Sri Lanka left the standing lending facility rate at 10%, in line with most of the forecasts from economists surveyed by Bloomberg.
The bank lowered the rate four times by a total of 650 basis points in 2023. The deposit rate was also held at 9%.
“The board arrived at this decision following a comprehensive assessment of domestic and international macroeconomic developments in order to maintain inflation at the targeted level of 5% over the medium term, while enabling the economy to reach its potential,” the bank said in a statement.
Sri Lanka’s economy expanded for the first time in nearly two years in the July to September quarter, gradually recovering from an unprecedented crisis and historic debt default in 2022.
The South Asian nation received a US$3bil financial bailout from the International Monetary Fund and is in the process of restructuring its debt.
“The board was of the view that there is space for market interest rates to continue to adjust downwards in line with past monetary policy easing measures and the falling risk premia attached to government securities,” the central bank said.
Inflation has come down sharply from a peak of 70% last year, although it’s started ticking up in recent months, hitting 4% in December.
Tax and food price increases are likely to fuel inflation further in January.
Acceleration of inflation in the near term is expected to be short-lived, the central bank said yesterday.
Further still, the spillover effects of one-off adjustments are likely to be muted due to subdued underlying demand conditions, the bank added. — Bloomberg
