Nov 26, Colombo: Sri Lanka’s Central Bank releasing the monetary policy review on Thursday said the Monetary Board has decided to continue the accommodative monetary policy stance.

Accordingly, The Monetary Board of the Central Bank of Sri Lanka, at its meeting held on 25 November 2020, 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 4.50 percent and 5.50 percent, respectively.

The Board arrived at this decision after carefully considering the macroeconomic conditions and expected developments on the domestic and global fronts, the Bank said in its review.

The Sri Lankan economy was seen as having recovered strongly during the third quarter of 2020, before the disruptions caused by the second wave of COVID-19, the Bank said.

Available economic indicators suggest a notable recovery in economic activity in the third quarter of 2020. The onset of the second wave of COVID-19 in October has adversely affected this momentum to some extent.

However, the impact of the containment measures on economic activity is not expected to be large, as mobility restrictions were imposed only in selected areas, and most of these restrictions have already been lifted in many areas.

The Central Bank said external sector remains resilient amidst challenging global developments with provisional data indicating that the deficit in the trade account continued to narrow significantly, on a year-on-year basis, for the sixth consecutive month in October 2020.

Monetary easing measures implemented so far during the year are being transmitted to the economy as reflected by the decline in most market interest rates. Both deposit and lending rates have declined notably.

Inflation remains subdued in the near term, and any build-up of inflationary pressures over the medium term will be addressed proactively when required.

The Central Bank said it will continue to monitor domestic and global macroeconomic and financial market developments and take further measures appropriately to ensure that the economy promptly reverts to its true potential of a high growth trajectory, while maintaining inflation in the targeted 4-6 percent range under its flexible inflation targeting framework.