Colombo June 1 2023: Sri Lanka’s central bank cut its key interest rates by 250 basis points on Thursday as inflation eased, signalling that the South Asian nation was emerging from a devastating financial crisis and ready for a rebound in growth.
The Central Bank of Sri Lanka (CBSL) cut its standing deposit facility rate and standing lending facility rate to 13% and 14%, respectively, from 15.5% and 16.5% previously.
Most analysts had expected the bank to keep rates steady. The rates are now at their lowest since March 2022, at the start of the crisis.
“Policy interest rates reduced in view of the faster deceleration of inflation, benign inflation outlook and the easing of BOP (balance of payment) pressures, thereby reinforcing the rebound of the economy,” the CBSL said.
“The rate cuts are expected to accelerate the normalisation of the interest rate structure, broadbase economic activity and ease pressures in financial markets helping steer the economy towards a rebound phase.”
Sri Lanka’s key Colombo Consumer Price Index rose 25.2% on year in May from 35.3% in April, reducing some stress on the crisis-hit economy which has crumpled under soaring inflation caused by its worst financial crisis in over seven decades.
