July 07, Colombo: Sri Lanka’s Central Bank today said it has decided to increase both the deposit rate and the lending rate by 100 basis points each to rein in inflationary pressures after carefully considering the current and expected macroeconomic developments both globally and domestically.
Accordingly, the Monetary Board of the Central Bank of Sri Lanka, at its meeting held on 06 July 2022, has decided to increase the Standing Deposit Facility Rate (SDFR) and the Standing Lending Facility Rate (SLFR) to 14.50 percent and 15.50 percent, respectively.
Statutory Reserve Ratio (SRR) meanwhile, remains unchanged at 4.00%.
“Having noted the higher than expected escalation of headline inflation recently and the increased persistence of high inflation in the period ahead, the Board was of the view that a further monetary policy tightening would be necessary to contain any build-up of adverse inflation expectations,” the Monetary Board said.
Such monetary policy tightening is expected to ensure that inflation expectations remain anchored around the targeted level of headline inflation over the medium term.
The Board, however, reiterated that the remedial policy measures adopted by the Central Bank need to be complemented by timely and appropriate policy adjustments by the Government, including the need for the expeditious implementation of fiscal consolidation measures, alongside efficient and effective social welfare programs to support the vulnerable groups of the society.
The Central Bank said it would continue to closely monitor domestic and global macroeconomic and financial market developments and be prepared to take further policy measures as appropriate to help reinforce greater stability in the economy in the period ahead, while ensuring a faster return of inflation to the targeted 4-6 per cent range over the medium term, under the flexible inflation targeting framework.