The Monetary Policy Board of the Central Bank of Sri Lanka, in its meeting on March 25, 2024, opted to decrease both the Standing Deposit Facility Rate (SDFR) and the Standing Lending Facility Rate (SLFR) by 50 basis points (bps) to 8.50 per cent and 9.50 per cent, respectively.
This decision stems from a thorough evaluation of current and anticipated domestic and global economic trends, aimed at maintaining inflation around the targeted 5 percent over the medium term while fostering economic growth. Factors considered by the Board include subdued aggregate demand, the moderate impact of recent tax changes on inflation, favourable short-term inflation trends due to adjustments in electricity tariffs, stable inflation expectations, minimal external sector pressures, and the imperative of sustaining a downward trend in market interest rates.
Despite potential near-term inflationary risks, the Board anticipates these to have minimal impact on the medium-term inflation outlook given the anticipated prolonged period of subdued economic activity. Emphasizing the importance of swiftly transmitting monetary easing measures to market interest rates, especially lending rates, the Board aims to expedite the normalization of market interest rates in the foreseeable future.
