Sri Lanka’s Central Bank cuts interest rates***

Sri Lanka’s Central Bank on Wednesday announced a cut in interest rates aimed at stimulating growth in an economy that recorded its lowest growth in nearly a decade, in 2017.The change was due to favourable developments in inflation and inflation outlook as well as lower than expected real GDP growth that further widened the prevailing gap between actual and potential GDP growth.
The Bank’s Monetary Board, at its meeting held on April 3, decided to reduce the Standing Lending Facility Rate (SLFR), which is the upper bound of the policy interest rate corridor of the Central Bank, by 25 basis points. “This decision is also expected to dampen the volatility observed in interest rates in the domestic market during the recent past,” the Bank said in a media release.

The continued slowdown in food inflation alongside the favourable base effect caused headline inflation, based on the Colombo Consumer Price Index (CCPI), to decelerate further in March 2018. During the first two months of 2018, a similar downward movement has been observed in National Consumer Price Index (NCPI) based inflation as well. Responding to the tight monetary policy stance, core inflation remained below-mid-single digit levels, while inflation expectations remain anchored. 
In keeping with these developments, headline inflation is projected to be within the targeted levels during 2018, even after accounting for the impact on inflation from possible administered price adjustments in the near term.

See full Central Bank statement 

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