As expected, the Central Bank of Sri Lanka (CBSL) has left the key interest rate unchanged. The central bank first wants to wait and see to what extent the recent interest rate hikes have affected the economy. In the meantime, falling global commodity prices are likely to moderate domestic inflation.
CBSL maintains the standing loan facility rate at 15.50% and the standing deposit facility rate at 14.50%.
“CBSL has decided to maintain the policy rate today. The committee looked at the latest model, which showed more-than-expected contraction in economic activity and inflationary pressures have slowed faster than expected,” CBSL said in a statement.
According to the latest data from the Sri Lankan government, inflation rose to 60.8% year-on-year in July and food prices to 90.9%.
In addition, the lack of foreign currency makes it difficult for the Sri Lankan government to pay for important imported goods such as fuel, fertilizer, food and medicine.