Jan 25, Colombo: Sri Lanka’s Central Bank releasing the monetary policy review on Wednesday 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 January 2023, 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.
Having noted the recent and expected developments and projections on the domestic and global macroeconomic fronts, the Board was of the view that the maintenance of the prevailing tight monetary policy stance is imperative to ensure that monetary conditions remain sufficiently tight to rein in inflationary pressures.
“Such tight monetary conditions, together with the tight fiscal policy, are expected to adjust inflation expectations downward, enabling the Central Bank to bring inflation rates towards the desired levels by end 2023, thereby restoring economic and price stability over the medium term,” the Central Bank said.,
Inflation continued to decline as envisaged in recent months and is projected to follow a faster disinflation path and the downward adjustment in inflation rates is expected to continue through 2023.
Domestic economic activity is expected to recover towards the latter part of 2023, compared to the large contraction in 2022. The economy is expected to make a gradual recovery during the year supported by the expected improvements in domestic supply conditions, underpinned by the timely implementation of corrective policy measures.
Excessive market interest rates have begun to adjust downward in response to the administrative measures adopted by the Central Bank and are expected to ease further in the period ahead.
The external sector remains resilient despite heightened challenges, and the outlook remains positive with the expected improvements in relation to “financing assurances” from creditors the Central Bank said.
The Board was of the view that the current monetary policy stance is appropriate to ensure that underlying monetary conditions in the economy remain sufficiently contained to drive inflation along the envisaged disinflation path.
The Central Bank said it will continue to closely monitor monetary conditions in the period ahead and will remain prepared to take swift and proactive measures, as appropriate.