Central Bank further tightens its monetary policy stance

The Central Bank of Sri Lanka has decided to increase its Standing Deposit Facility Rate (SDFR) and the Standing Lending Facility Rate (SLFR) by 100 basis points to 14.50 per cent and 15.50 per cent, respectively.

The decision was taken at the meeting of Central Bank’s Monetary Board yesterday (July 06).

Having noted the higher-than-expected escalation of headline inflation recently and the increased persistence of high inflation in the period ahead, the Monetary Board was of the view that a further monetary policy tightening would be necessary to contain any build-up of adverse inflation expectations.

In arriving at this decision, the Monetary Board has weighed the impact of tighter monetary conditions on overall economic activity, including the micro, small, and medium scale businesses, and the financial sector performance, among others, against far-reaching adverse consequences of any escalation of price pressures across all sectors of the economy in the near term.

On balance, the Monetary Board was of the view that this policy adjustment would help guide inflation expectations to be anchored around the targeted level of headline inflation over the medium term, while curtailing any build-up of underlying demand pressures in the economy.

CBSL Monetary Policy Review No 5-July 2022 by Adaderana Online on Scribd