• Last Update 2025-01-30 18:15:00

No change in interest rates after key Central Bank meeting

News

 

There was no change in the interest rate (Overnight Policy Rates) of the Central Bank, as announced on Wednesday, after its Monetary Policy Board met on Tuesday. The rate remains at 8 per cent.

A statement from the banking regulator said the Board arrived at this decision following a careful analysis of the current and expected macroeconomic developments on the domestic and global fronts.

This decision was made with a medium-term view of ensuring that inflation converges to the target of 5 per cent, while supporting the economy to reach its potential. The Board observed that the current period of deflation, as projected earlier, has largely been an outcome of administratively determined energy price reductions. This trend is expected to continue over the next few months before inflation begins adjusting towards the targeted level in the second half of 2025, the statement said.

Headline inflation, as measured by the year-on-year change in the Colombo Consumer Price Index (CCPI), remained in the negative territory for the fourth consecutive month in December 2024. This was mainly driven by the previous downward revisions to electricity tariffs and domestic fuel prices, amidst subdued demand pressures. Latest projections indicate deeper deflation than previously projected, mainly due to the more than anticipated downward adjustment in the electricity tariff announced in January 2025. Inflation is expected to turn positive from mid-2025 and converge towards the targeted level of 5 per cent over the medium term, supported by appropriate policy adjustments. Core inflation, which is currently in lower positive levels, is projected to decelerate further over the next few months, before adjusting upwards thereafter.

As per the GDP estimates published by the Department of Census and Statistics (DCS), the economy is estimated to have grown by 5.5 per cent (year-on-year) in Q3 2024, following an expansion of 4.7 per cent (year-on-year) recorded in Q2 2024. The latest economic indicators suggest that robust economic growth is likely to have continued, resulting in higher growth for 2024 than initially projected.

The merchandise trade deficit widened during 2024 compared to the previous year, due to a larger expansion in import expenditure relative to export earnings. However, improvements in earnings from tourism and workers’ remittances contributed positively to the external current account during this period. Following an appreciation of 10.7 per cent in 2024, the Sri Lanka rupee recorded a year-to-date depreciation of around 2.0 per cent against the US dollar thus far in 2025. The external debt restructuring process, except for a small portion, was completed successfully in December 2024, strengthening the external sector outlook of the country. The Gross Official Reserves (GOR) stood at US$6.1 billion at end 2024. This includes the Bilateral Currency Swap facility from the People’s Bank of China, which was renewed for a further period of three years in December 2024.

- ENDS -

You can share this post!

Comments
  • Still No Comments Posted.

Leave Comments