Sri Lanka’s central bank retained its key interest rates as policymakers assessed that the current accommodative monetary policy stance was appropriate.
The Monetary Board of the Central Bank of Sri Lanka, on Thursday, decided to hold the Standing Deposit Facility Rate at 4.50 percent and the Standing Lending Facility Rate at 5.50 percent.
The bank had last reduced its key rates by 100 basis points in July.
Both headline and core inflation based on consumer price indices remained low. Inflation was projected to remain subdued during the remainder of the year.
The bank expects domestic [economy][1] to make a notable recovery in 2021, supported by policy stimulus and improving [business][2] sentiments.
The central bank urged banks to scale up lending to productive sectors of the economy and support domestic production in line with the national policy direction.
The bank said it will take further proactive measures to help the economy to reach a sustainable high growth trajectory, while maintaining inflation in the targeted 4-6 percent range under the flexible inflation targeting framework.
Given the poor outlook for the economy, the CBSL will want to resume its easing cycle soon, but that will only happen if pressure on the rupee subsides, Alex Holmes, an economist at Capital Economics, said.
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