Sri Lanka holds rates to manage inflation, foster economic stability

By Reuters
May 29, 2024
Central Bank of Sri Lanka seen in this undated image.— Reuters/file

COLOMBO: Sri Lanka’s central bank held interest rates steady on Tuesday to ensure inflation pressures remain in check as authorities look to foster economic stability and lift growth following the South Asian nation’s worst financial crisis in decades.


The Central Bank of Sri Lanka (CBSL) kept the Standing Deposit Facility Rate at 8.50% and the Standing Lending Facility Rate at 9.50%, it said in a statement.The decision surprised some in the market as eight out of 15 economists and analysts polled by Reuters had projected rates to be cut by 50 basis points.

Sri Lanka’s key annual inflation rate was at 1.5% in April, down from 6.4% at the start of the year, and prices appear well anchored, the central bank said in a statement.“Incoming data suggests that headline inflation is likely to be below the targeted level of 5 per cent in the upcoming months due to the combined impact of the administered price adjustments and eased food prices, although some upside risks remain,” the central bank said.

CBSL reduced rates by 50 bps in March as it continued an easing cycle that has seen rates drop by 700 bps since June, partially reversing the 1,050 bps in increases made since April 2022 when the economy plunged into crisis.