Nov 24, 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 23 November 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.
In arriving at this decision, the Board considered the latest macroeconomic conditions, expected developments and macroeconomic projections, the Central Bank said.
The Board noted that the maintenance of tight monetary policy stance is necessary to contain any demand driven inflationary pressures in the economy, while helping to further strengthen disinflation expectations, thus enabling to steer headline inflation towards the targeted level of 4-6 percent over the medium term.
The Board was of the view that the prevailing tight monetary policy stance is necessary to rein in any underlying demand pressures in the economy.
However, the Board noted with concern the anomalous rise in market interest rates, particularly deposit interest rates and short-term lending interest rates, despite the recent improvements in overall money market conditions and the adverse implications on business and economic activity. T
The Board noted that the headline inflation marked a turnaround as expected.
“Supported by favorable supply side developments and tight monetary policy measures, headline inflation pivoted towards the envisaged disinflation path in October 2022, after passing the peak in September 2022,” it said.
The Board expects the domestic economic activity is expected to remain tepid during 2022 and make a gradual, yet sustainable recovery, supported by envisaged improvements in supply conditions, improved market confidence, and the impact of corrective policy measures being implemented to stabilize the economic conditions
The Central Bank Monetary Board reiterated its continued commitment to restoring price stability and ensuring financial system stability, and remains confident that inflation would follow the projected disinflation path underpinned by the prevailing monetary policy stance, while supporting the economy to reach its potential over the medium term.