CBSL Holds key Policy Rates

The Monetary Board of the Central Bank of Sri Lanka (CBSL), at its meeting held on 18 May 2022, decided
to maintain the Standing Deposit Facility Rate (SDFR) and the Standing Lending Facility Rate
(SLFR) of the Central Bank at the current levels of 13.50 percent and 14.50 percent, respectively.

The Board is of the view that although inflation is projected to remain elevated in the near term, the
the decision for a 700 basis point hike in policy rates taken by the Board, at its meeting held on 08 April 2022, combined with the other measures to stem the firming up of aggregated demand pressures, are expected to contain any further build-up of inflation expectations and ease inflationary pressures in the period ahead.

It also viewed that the policy measures that have already been implemented by the Central Bank would continue to be further transmitted to the financial markets, while some signs of tighter monetary policy already being observed in real economic activity.

CBSL Stressed that order to prevent further deterioration of economic conditions and complement the efforts of the Central Bank implemented thus far, urgent measures are required to restore greater political stability through consensus governance and social harmony.

“Swift policy actions are required to strengthen the fiscal performance that would help avoid excessive reliance on monetary financing and maintain fiscal sustainability over the medium term. Furthermore, expeditious and transparent revision of tariffs in the energy sector remains a priority in order to strengthen the financial position of energy-related state owned business enterprises, while improving the efficiency of social welfare programmes to support the vulnerable groups of the society impacted by the unprecedented economic circumstances,” it added.