Sunday, October 17, 2021

Sri Lanka’s central bank to keep policy rates steady despite supply-side pressures

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The Central Bank of Sri Lanka, CBSL, has announced on Thursday that it would keep policy rates at their current levels while maintaining inflation at targeted levels and supporting economic recovery.

In its seventh monetary policy review for the year, the CBSL announced that the Standing Deposit Facility Rate, SDFR, and the Standing Lending Facility Rate, SLFR.

It said the policy would remain at 5 per cent and 6 per cent respectively until the next review on Nov. 25.

The CBSL said that inflation had accelerated in recent months, partly due to surging global commodity prices which would cause headline inflation to deviate from the targeted range in the near term.

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“While such supply-side developments in the near term do not warrant monetary policy tightening, measures already taken by the Central Bank in relation to interest rates and market liquidity will help stabilise demand pressures over the medium term,’’ the CBSL said.

The CBSL added the country recorded real growth of 4.3 per cent and 12.3 per cent in the first and second quarters of 2021 respectively.

“Available indicators and projections suggest that the real economy will grow by around 5 per cent in 2021, and gradually traverse to a high and sustained growth trajectory over the medium term.

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“also, following near-term stabilisation measures that are being put in place by the government and the central bank,’’ the CBSL said.

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The CBSL noted that export revenue has crossed 1 billion dollars for three consecutive months, with additional inflows from tourism expected in the coming months.

Sri Lanka’s foreign reserves stood at 2.6 billion U.S. dollars at the end of September.


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