June 01, 2023 (MLN): Sri Lanka has cut its Standing Lending Facility Rate (SLFR) of the Central Bank by 250 basis points to 14%, latest data issued by the Central Bank of Sri Lanka (CBSL) showed on May 31.
Additionally, Standing Deposit Facility Rate (SDFR) was also reduced by 250 basis points to 13%.
The Board arrived at this decision with a view to easing monetary conditions in line with the faster-than-expected slowing of inflation, gradual dissipation of inflationary pressures, and further anchoring of inflation expectations, said a press release issued by the economic research department on May 31.
The commencing of such monetary easing is expected to provide an impetus for the economy to rebound from the historic contraction of activity witnessed in 2022 while easing pressures in the financial markets.
Headline inflation YoY, based on the Colombo Consumer Price Index (CCPI), continued the deceleration path, faster-than-projected earlier, supported by the lagged impact of tight monetary and fiscal policies, strengthening of the Sri Lanka rupee, reduction in fuel and gas prices, normalization of food prices and the favourable impact of the statistical base effect, the statement reads.
Accordingly, as per the latest projections of the CBSL, headline inflation is forecast to reach single-digit levels in early Q3 2023, and stabilize around mid single-digit levels over the medium term, it added.
