In its first monetary policy review under the Central Bank of Sri Lanka Act, No. 16 of 2023 (CBA), the Monetary Policy Board of the Central Bank of Sri Lanka (CBSL) announced a reduction in both the Standing Deposit Facility Rate (SDFR) and the Standing Lending Facility Rate (SLFR) by 100 basis points (bps), setting them at 10.00% and 11.00%, respectively.
This decision, made during the review held on Wednesday, October 4, was the result of a thorough analysis of current and expected economic developments. The assessment took into account factors such as low inflation and favorable inflation expectations within the domestic economy. The aim is to stabilize inflation at the targeted 5% level in the medium term, thus creating an environment conducive to the economy's potential growth.
The CBSL's Economic Research Department released a press statement outlining the rationale behind the interest rate reduction. The Monetary Policy Board anticipates that this move, in conjunction with previous measures to ease monetary policy and directives to licensed banks to lower interest rates, will lead to a notable decrease in market interest rates, particularly lending rates, in the foreseeable future.
Furthermore, the financial sector has been strongly encouraged to swiftly and adequately pass on the advantages of these relaxed monetary conditions to individuals and businesses. This support is expected to play a crucial role in facilitating the projected economic rebound.
