The Monetary Board of the Central Bank of Sri Lanka (CBSL) has increased policy rates by 50 basis points to l curtail the possible build-up of underlying demand pressures in the economy.
The Monetary Board of the Central Bank of Sri Lanka, at its meeting, held on 19th January decided to increase the Standing Deposit Facility Rate (SDFR) and the Standing Lending Facility Rate (SLFR) of the Central Bank by 50 basis points each, to 5.50 per cent and 6.50 per cent, respectively.
“The Monetary Board was of the view that the above measures will curtail the possible build-up of underlying demand pressures in the economy, which would also help ease pressures in the external sector, thus promoting greater macroeconomic stability. In keeping with this policy stance, the Central Bank expects a corresponding increase in interest rates, particularly in deposit rates, thereby encouraging savings, while discouraging excessive consumption, which also fuels imports,” the CBSL said.
The CBSL urged financial institutions to swiftly pass on this increase to deposit rates of the customers. Moreover, the anticipated adjustment in market interest rates will facilitate the reduction in the Treasury bill holdings of the Central Bank through increased market subscriptions, as enunciated in the Six-Month Road Map for Ensuring Macroeconomic and Financial System Stability.