Aug 18, 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 17 August 2022, has 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 14.50 percent and 15.50 percent, respectively.
The Board is of the view that although inflation is projected to remain elevated in the near term, the policy measures taken by the Central Bank and the Government so far would help contain any aggregated demand pressures thereby anchoring inflation expectations, along with the anticipated decline in global commodity prices and its pass through to domestic prices in the period ahead.
The Monetary Board expects the domestic economic activity to record a notable downturn this year.
The impact of persisted supply side disruptions, primarily due to shortages of power and energy, and uncertainties associated with socio-political developments that caused significant adverse effects on economic growth in Q2 2022 is expected to continue through Q3 2022 as well resulting in a larger than expected contraction in real activity in 2022.
However, real GDP growth is expected to recover in the period ahead, with the envisaged stabilization of macroeconomic conditions and implementation of structural reforms in the economy.
The Central Bank noted that the pace of acceleration of inflation has moderated faster than expected and such moderation is expected to continue in the period ahead, thereby resulting in a low level of inflation by end 2022.
The Board was of the view that the effective market interest rates are notably high and policy measures that have already been implemented by the Central Bank would continue to be further transmitted to the overall economy.
The Central Bank said it would continue to monitor domestic and global macroeconomic and financial market developments and stand ready to take appropriate measures proactively to stabilize inflation at the desired range and help reinforce greater macroeconomic stability in the period ahead.