Sri Lanka’s Fifth Central Bank Rate Cut of 2020

July 9, 2020

The Central Bank of Sri Lanka became the latest monetary authority to slash interest rates. The Standing Deposit Facility and Standing Lending Facility rates were each reduced by 100 basis points to 4.5% and 5.5%, respectively. Earlier this year, cuts of 25 bps in March and April were sandwiched between 50-basis point cuts in January and May, so with today’s move the total decline so far in 2020 amounts to 250 basis points. A released statement explaining the latest policy easing says the intent is to promote bank lending, encourage a further drop in market rates, and counteract the drag from the Covid-19 pandemic. An implicit goal is to dampen upward pressure on the rupee that’s risen notably since mid-April. Sri Lanka’s trade gap has narrowed, and inflation is “subdued.”

Copyright 2020, Larry Greenberg. All rights reserved. No secondary distribution without express permission.



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