COLOMBO: Sri Lanka kept borrowing costs unchanged for a second consecutive meeting as the central bank judged the current level of interest rates to be tight enough to bring down inflation in an economy already in the grip of a recession.
The Central Bank of Sri Lanka (CBSL) kept the Standing Lending Facility rate unchanged at 15.5% yesterday, a move predicted by four out of five economists in a Bloomberg survey, one of them s expecting a 150 basis point increase.
The decision comes as policymakers seek to limit the impact of a deepening economic slowdown and crippling shortages, having already raised the key rate this year by 9.5 percentage points to curb inflation the most. fastest in Asia.
Along with the tightening of fiscal policy, the central bank sees current monetary measures as helping to prevent any buildup of demand pressures.
Authorities expect past rate hikes to help achieve the envisioned disinflation path. Headline inflation, currently at a record high of nearly 70%, is expected to return to the central bank’s medium-term target of 4% to 6%, the CBSL said in a statement.
“Moderate aggregate demand pressures resulting from tight monetary and fiscal conditions, expected improvements in domestic supply conditions, normalization of world food and other commodity prices, and the The timing of these domestic price cuts, along with the favorable statistical base effect, will help lower inflation,” he said. —Bloomberg