Sri Lanka's central bank governor Nandalal Weerasinghe speaks at a press conference in Colombo, Sri Lanka, on March 26, 2024. Sri Lanka's central bank decided to reduce the Standing Deposit Facility Rate (SDFR) and the Standing Lending Facility Rate (SLFR) by 50 basis points to 8.50 percent and 9.50 percent respectively, the bank's statement said on Tuesday. (Photo by Gayan Sameera/Xinhua)
COLOMBO, March 26 (Xinhua) -- Sri Lanka's central bank decided to reduce the Standing Deposit Facility Rate (SDFR) and the Standing Lending Facility Rate (SLFR) by 50 basis points to 8.50 percent and 9.50 percent respectively, the bank's statement said on Tuesday.
The central bank said its monetary board arrived at this decision at its meeting on Monday following a comprehensive assessment of current and expected domestic and international economic developments, to maintain inflation at the targeted level of 5 percent over the medium term, while enabling the economy to reach its potential.
In arriving at this decision, the board took note of, among others, subdued aggregate demand conditions, the lesser-than-expected impact of the recent changes to the tax structure on inflation, favorable near-term inflation dynamics due to the recent adjustment to electricity tariffs, well-anchored inflation expectations, the absence of excessive external sector pressures and the need to continue the downward trajectory in market interest rates, according to the central bank.
The board observed that the possible upside risks to inflation in the near term would not materially change the medium-term inflation outlook, as economic activity is projected to remain below par for an extended period.
The monetary policy board underscored the need for a swift and full passthrough of monetary easing measures to market interest rates, particularly lending rates, by the financial institutions, thereby accelerating the normalization of market interest rates in the period ahead, the central bank said.
Sri Lanka increased its interest rates significantly in 2022 to deal with rising inflation. The rates have been reduced several times in 2023. ■