Sri Lankan Monetary Policy Settings Deemed Still Appropriate

January 27, 2015

The latest policy review at the Central Bank of Sri Lanka retained an 8% lending rate, a 6.5% deposit rate, and a 6% reserve requirement ratio.  The interest rates arrived at current levels after reductions in each of 25 bps in December 2012, 50 bps in May 2013 and 50 bps in October 2013, plus a 50-bp cut in the lending rate only in January 2014.  While growth is projected to be robust, inflation will be held down by both demand-side and supply-side factors.  Private sector credit is expanding adequately.  Elections in April will possibly generate some outflow of capital, so policymakers are reluctant to cut interest rates in immediate reaction to the dive in global oil prices.

Copyright 2015, Larry Greenberg.  All rights reserved.  No secondary distribution without express permission.

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