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Policy interest rates of the Central Bank of Sri Lanka to remain unchanged

The Monetary Board of the Central Bank of Sri Lanka, at its meeting held on 26 December 2019, decided to maintain its accommodative monetary policy stance with the Standing Deposit Facility Rate (SDFR) and the Standing Lending Facility Rate (SLFR) of the Central Bank remaining at their current levels of 7.00 per cent and 8.00 per cent, respectively.
The Board arrived at this decision following a careful analysis of current and expected developments in the domestic economy and the financial market as well as the global economy. The decision of the Monetary Board is consistent with the aim of maintaining inflation in the 4-6 per cent range while supporting economic growth to reach its potential over the medium term.

The pace of monetary policy easing in advanced economies appears to be slowing
Most advanced economies, which followed a monetary easing path owing to the general economic slowdown and muted inflation expectations, appear to have paused further monetary easing.However, most of the emerging market policymakers remained open to further accommodation in the period a headin order to stimulate activity in their economies.

Domestic economic activity to recover gradually
As per the provisional estimates released by the Department of Census and Statistics, the Sri Lankan economy grew at theslow pace of 2.7 per cent during the third quarter of 2019followingthe growth of 1.5 per cent in the second quarter of the year. Agriculture related activities grew marginally by 0.4 per cent,while Services and Industry related activities expanded by 2.8 per cent and 3.3 per cent,respectively. Going forward, a steady revival of economic activity is envisaged,supported by improved political stability and short term measures to stimulate the economy.It is expected that this momentum will be sustained through the introduction of appropriate medium to long term structural reforms.

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