Sri Lankan Interest Rates Cut

May 31, 2019

The Central Bank of Sri Lanka cut its interest rates by a half percentage point, citing the Easter terrorist attacks there, easier monetary policies elsewhere, downward rigidity in Sri Lankan market rates, slowing private sector credit expansion, a narrowed trade deficit, and subpar domestic growth. A recent uptick of inflation was dismissed as not being a threat to the medium term inflation outlook.

The Standing deposit facility rate was sliced to 7.5%, while the standing lending facility rate becomes 8.5%. Only last November, those rates had been raised by 75  and 50 basis points, respectively, as a counterpoint to a 1.5 percentage point reduction of bank reserve requirements to 6.0%. At that time, officials stressed that the rate hikes did not represent a tightening of the monetary policy stance but rather were needed to neutralize the expansionary impact of reducing the reserve requirement.

Copyright 2019, Larry Greenberg. All rights reserved. No secondary distribution without express permission.



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