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Sri Lanka Central Bank Keeps Rates Unchanged

Sri Lanka's central bank left its key interest rates unchanged, as widely expected, on Thursday.

The Monetary Board of the Central Bank of Sri Lanka decided to hold the Standing Deposit Facility Rate and the Standing Lending Facility Rate of the central bank at their current levels of 4.50 percent and 5.50 percent, respectively.

The bank had last reduced the rate by 100 basis points in July 2020.

The economy is forecast to grow around 5 percent this year with the removal of mobility restrictions, the bank said. The upward momentum of economic activity is envisaged to sustain over the medium term.

The central bank expects inflation to remain broadly within the desired target range of 4-6 percent in the remainder of 2021.

The envisaged improvements in aggregate demand conditions together with the likely increases in global commodity prices may generate some inflationary pressures over the medium term, the board observed.

Such pressures will be mitigated through timely policy intervention by the central bank, thereby ensuring the maintenance of inflation in mid-single digit levels over the medium term, the bank said.

The bank added that it stands ready to take appropriate measures, as and when necessary, with the aim of maintaining inflation in the targeted 4-6 percent range.

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