Sri Lanka cuts interest rates to boost growth while waiting for IMF review

Sri Lanka’s central bank lowered interest rates on November 24 in an unexpected move to boost growth, while projecting inflation would remain subdued over the medium term, Report informs referring to CNA.

Helped by its bailout by the International Monetary Fund, the South Asian island nation is recovering from its worst financial crisis in seven decades and awaiting the finalization of its first review from the global lender.

The Central Bank of Sri Lanka (CBSL) lowered key rates by 100 basis points (bps), reducing the standing deposit facility rate and the standing lending facility rate to 9 percent and 10 percent, respectively, and taking total rate cuts to 650 bps since the current easing cycle began in June.

CBSL had raised rates by a record 10.50 percentage points to bring down sky-high inflation between April 2022 and March this year.

The board arrived at the decision, "with the aim of achieving and maintaining inflation at the targeted level of 5 percent over the medium term, while enabling the economy to reach and stabilize at the potential level", it said in a statement.

With this reduction, further easing will be paused in the near term, it added, given that space exists for market interest rates to adjust downwards and reiterated the need for that to happen to ease domestic monetary conditions further.