Oct 11, Colombo: Sri Lanka's Central Bank releasing the monetary policy review on Friday said given the current and expected conditions in the domestic economy and the financial market, the Monetary Board was of the view that the continuation of the current monetary policy stance is appropriate.
Accordingly, the Standing Deposit Facility Rate (SDFR) and the Standing Lending Facility Rate (SLFR) of the Central Bank will remain at 7.00 percent and 8.00 percent, respectively.
The Board said it arrived at this decision following a careful analysis of current and expected developments in the domestic economy, the financial market as well as the developments in the global economy, with the aim of stabilizing inflation in the desired 4-6 percent range while supporting economic growth to reach its potential over the medium term.
The Sri Lankan economy grew at a slow rate of 1.6 percent (year-on-year) during the second quarter of 2019, following the growth of 3.7 percent recorded in the first quarter of 2019.
The Central Bank observed a notable slowdown in the performance of the Services related activities, which were impacted severely by the Easter Sunday attacks. Agriculture and Industry related activities are also estimated to have grown sluggishly during the second quarter of 2019, compared to the previous quarter.
Accordingly, the Bank expects the economic growth to remain subdued in 2019, and a gradual recovery is expected over the medium term.
However, inflation is projected to stabilize well within the desired range of 4-6 percent, supported by appropriate policy measures and well anchored inflation expectations.
Trade performance during the first eight months of 2019 recorded an improvement over the previous year, supported by a notable contraction in the growth of imports and a modest growth of exports.
Tourist arrivals continued to improve, recovering gradually from the effects of the Easter Sunday attacks, while workers' remittances moderated.
Outflows of foreign investment in the Government securities market experienced in August 2019 have ceased thereafter, while the equity market recorded a modest net inflow so far during the year when both primary and secondary market transactions are considered.
The Sri Lankan rupee remains appreciated against the US dollar by 1.3 percent thus far during the year, while gross official reserves are estimated at US dollars 7.6 billion by end September 2019, providing an import cover of 4.5 months.
"Considering the current and expected conditions in the economy and the financial market, the Monetary Board at its meeting held on 10 October 2019, was of the view that, at present, the measures that have been put in place during the past twelve months are sufficient to achieve the desired outcomes, given adequate time for their transmission through the financial sector," the Central Bank said.
Accordingly, the Monetary Board decided to maintain the Standing Deposit Facility Rate (SDFR) and the Standing Lending Facility Rate (SLFR) of the Central Bank at their current levels of 7.00 percent and 8.00 percent, respectively