According to a statement released by the Central Bank of Sri Lanka on Friday, the bank has decided to lower the Standing Deposit Facility Rate (SDFR) and the Standing Lending Facility Rate (SLFR) by 100 basis points, to 9.00 percent and 10.00 percent, respectively.
In order to achieve and maintain inflation at the targeted level of 5% over the medium term, while allowing the economy to reach and stabilize at the potential level, the central bank said that its monetary policy board made this decision after carefully analyzing recent and anticipated developments in the domestic and global economy.
“The board took note of possible upside risks to inflation projections in the near term due to supply-side factors stemming from the expected developments domestically and globally. However, the board viewed that such near-term risks would not materially change the medium-term inflation outlook, as inflation expectations of the public remain anchored and economic activity is projected to remain below par in the near to medium term,” the central bank said.
The board concluded that enough monetary easing had been achieved to stabilize inflation over the medium term with the policy interest rate reduction and the monetary policy actions implemented since June 2023, according to the central bank.
In 2022, Sri Lanka raised interest rates considerably in response to growing inflation. In 2023, there have been multiple rate reductions.