Sri Lanka’s central bank left its key interest rates unchanged on Thursday, for the fourth straight policy session, to soften the demand-driven inflationary pressures in the economy, while also to help further strengthen disinflation expectations.
The Monetary Board of the Central Bank of Sri Lanka kept its standing deposit facility rate at 14.50 percent and the standing lending facility rate at 15.50 percent.
The previous change in the interest rate was a full percentage hike in July. Earlier in April, the bank had hiked rates by a massive 700 basis points.
The Board noted that maintaining a tight monetary policy stance is necessary to contain any demand-driven inflationary pressures in the economy, while further strengthening disinflation expectations, helping to steer headline inflation toward the targeted level of 4-6 percent over the medium term.
Recent data showed that the headline inflation moderated to 66.0 percent in October from 69.8 in September, and core inflation eased from 50.2 to 49.7.
Meanwhile, the real economy is expected to contract this year amid tightened monetary and fiscal conditions, along with supply side constraints and prevailing uncertainties.
However, the economy is expected to make a gradual recovery, boosted by improvements in supply conditions, improved market confidence, and the impact of corrective policy measures, the bank said.
Policymakers reiterated their continued commitment to restoring price stability and ensuring financial system stability, and remains confident that inflation would follow the projected disinflation path underpinned by the prevailing monetary policy stance, while supporting the economy to reach its potential over the medium term, the bank said.