Nov 25, Colombo: Sri Lanka’s Central Bank releasing the monetary policy review on Thursday said the Monetary Board has decided to continue the current monetary policy stance.
Accordingly, the Monetary Board of the Central Bank of Sri Lanka, at its meeting held on 24 November 2021, 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 5.00 percent and 6.00 percent, respectively.
The Board has decided to maintain rates after carefully considering the macroeconomic conditions and expected developments on the domestic and global fronts.
“The Board noted the recent acceleration of inflation, driven mainly by supply disruptions and the surge in global commodity prices, and reiterated its commitment to maintaining inflation at the targeted levels over the medium term with appropriate measures, while supporting the economy to reach its potential in the period ahead,” the Bank said.
The Economic Research Department report said the Sri Lankan economy witnessed a strong recovery during the first half of 2021, supported by fiscal and monetary stimulus measures. The re-emergence of the COVID-19 pandemic and the resultant disturbances to production activities appear to have affected the ongoing recovery somewhat during the third quarter of 2021.
However, the available high frequency indicators suggest that economic activity is fast returning to normalcy, the Bank said.
According to the report, the external sector remains resilient against strong headwinds although Inflation accelerated recently mainly due to supply side disturbances and the surge in commodity prices internationally.
Considering the current and expected macroeconomic developments, the Monetary Board was of the view that the current level of policy interest rates is appropriate.
The Central Bank said it will nevertheless remain vigilant and continue monitoring domestic and global macroeconomic and financial market developments and will take appropriate measures, as and when necessary, with the aim of ensuring stability in the external sector, maintaining inflation in the desired range, and supporting sustained economic recovery.