Sri Lanka starts next phase of economic recovery
View(s):The Central Bank (CB) has started the next phase of economic recovery with monetary policy easing via a surprise interest rate cut for the first time in nearly three years with balance of payment pressure diminishing, and currency appreciation taking place, CB Governor Nandalal Weeerasinghe announced.
The interest rates should be much lower than the current market rates. “That’s why we are giving this message, conveying both exchange rate policy and interest rate path,” he told the media on Thursday.
The Monetary Board has decided to bring down standing deposit facility rate and standing lending facility rate by 250 basis points – to 13 per cent and 14 per cent, respectively, from 15.5 per cent and 16.5 per cent.
Licensed commercial banks are now compelled to bring down the lending rate for businesses following the relaxation of the CB’s monetary policy stance.
He expressed confidence in bringing down the inflation to a single digit soon as it is now moving towards the target range much earlier than expected, supported by the currency appreciation, the decline in the fuel and petroleum prices and global prices. .
The CB has allowed the rupee to appreciate from around Rs. 360 to the US dollar in March to around Rs. 290 to the US dollar up to now without intervening in the market, he said, adding that they continue to build reserves.
It has bought dollars amounting to US$ 662 million in May and a total of net purchasing was in the region of $1,671 up to now build reserves preventing excessive volatility, he revealed.
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