News

CB reduces interest rates by 100 basis points to tackle inflation and ease borrowing costs

Published

2 years ago

2023/11/25

The Monetary Policy Board of the Central Bank, at its meeting held on Thursday (23), decided to reduce the Standing Deposit Facility Rate (SDFR) and the Standing Lending Facility Rate (SLFR) of the Central Bank by 100 basis points (bps) to 9.00 percent and 10.00 percent, respectively, CB said in a press release.

It said: The Board arrived at this decision following a careful analysis of the current and expected developments in the domestic and global economy, 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 stabilise at the potential level.

The Board took note of possible upside risks to inflation projections in the near term due to supply-side factors stemming from the expected developments, domestically and globally. However, the Board viewed that such near term risks would not materially change the medium-term inflation outlook, as inflation expectations of the public remain anchored and economic activity is projected to remain below par in the near to medium term. Further, the Board viewed that with this reduction of policy interest rates, along with the monetary policy measures carried out since June 2023, sufficient monetary easing has been effected in order to stabilise inflation over the medium term.

Hence, the Monetary Policy Board underscored the need for a swift and full pass through of monetary easing measures to market interest rates, particularly lending rates, by the financial institutions, thereby accelerating the normalisation of market interest rates in the period ahead.

Headline inflation continues to remain low, reflecting subdued demand conditions. Headline inflation, as measured by the year-on-year change in the Colombo Consumer Price Index (CCPI, 2021=100), was recorded at 1.5 percent in October 2023 compared to 1.3 percent in September 2023.

Food inflation continued to be negative (year-on-year) for the fourth consecutive month in October 2023. The National Consumer Price Index (NCPI, 2021=100) based headline inflation (year-on-year) was recorded at 1.0 percent in October 2023, compared to 0.8 percent in September 2023.

Both CCPI and NCPI based core inflation (year-on-year), which reflects underlying demand pressures in the economy, moderated further in October 2023, reflecting the subdued demand pressures in the economy. A one-off upward movement in inflation is expected in the near term, driven mainly by the changes to the Value Added Tax (VAT) proposed by the Government effective January 2024. The spillover effects of tax measures and other developments are likely to be muted due to subdued underlying demand pressures; hence, this rise in inflation is expected to be transitory. Accordingly, headline inflation over the medium term is expected to converge towards the targeted level of 5 percent, supported by appropriate policy measures.

Market interest rates are expected to normalise in the period ahead. Market interest rates continued to adjust downwards, and most benchmark interest rates have declined significantly. Meanwhile, the yields on government securities are also adjusting downwards with falling risk premia. The reduction of policy interest rates by 100 bps in this monetary policy review is expected to create further space for market interest rates to adjust downward and normalise in the period ahead. Reflecting the transmission of the relaxed monetary policy stance, outstanding credit to the private sector by the banking sector expanded on a monthly basis in September as well as in October 2023 based on provisional data. With the moderation of market lending interest rates, credit to the private sector is expected to increase further in the period ahead, thereby supporting the envisaged rebound of domestic economic activity.

The Board anticipates a swift, sizeable and broad-based reduction in overall market lending interest rates in line with the monetary policy easing measures effected since June 2023. Such adjustment in interest rates is imperative to ease the domestic monetary conditions further. The Board stressed the need for all licensed banks to take swift measures to reduce market lending interest rates to ensure that the benefits of the series of monetary policy easing measures are adequately passed on to businesses and households.

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News

Navy divers restore sluice gate of Bomburuella Reservoir

Published

4 hours ago

2026/01/23

Priyan

The Sri Lanka Navy successfully conducted a diving operation on 19 Jan 26 to inspect and restore the sluice gate of the Bomburuella Reservoir.

Acting on a request from the Department of Irrigation, the Sri Lanka Navy deployed a specialized diving team from the Western Naval Command, for the urgent requirement.

Through concerted effort, the Navy divers successfully cleared accumulated debris, including a significant quantity of wooden fragments, which had impeded the sluice gate mechanism.

News

PM holds High-Level meetings with EU, UNDP, and corporate leadership at World Economic Forum

Published

8 hours ago

2026/01/23

Priyan

Prime Minister Dr. Harini Amarasuriya held a series of high-level bilateral meetings on Wednesday [January 21] on the sidelines of the World Economic Forum in Davos, Switzerland, engaging with representatives of the European Union, the United Nations Development Programme, and the global private sector.

The Prime Minister met with Hadja Lahbib, European Commissioner for Preparedness and Crisis Management. During the meeting, she expressed Sri Lanka’s appreciation for the support extended by the European Union and its member states following Cyclone Ditwa. The Prime Minister also briefed the Commissioner on the key findings of the World Bank’s GRADE report and requested continued EU support for Sri Lanka’s development and recovery efforts.

Prime Minister Amarasuriya also met with Alexander De Croo, representing the United Nations Development Programme. She expressed appreciation for the longstanding partnership between Sri Lanka and the United Nations and acknowledged the UN’s support in flood relief and livelihood assistance. The Prime Minister noted that, following the mandate received at the parliamentary election, the government is focused on meeting public expectations through national rebuilding grounded in public trust and good governance. She further reaffirmed the Government of Sri Lanka’s commitment to strengthening social protection systems and safeguarding vulnerable communities.

In addition, the Prime Minister met with Robert M. Uggla, Chairman of A.P. Moller Holding. The discussion focused on engagement with the private sector and potential areas of collaboration.

These meetings reflected Sri Lanka’s continued engagement with international partners and global stakeholders to support recovery, development, and long-term economic stability.

[Prime Minister’s Media Division]

News

Opposition slams sitting HC judge’s appointment as Justice Ministry Additional Secretary

Published

12 hours ago

2026/01/23

Thilina Walpola

Prof. Peiris

… alleges Prez trying to control judiciary

Opposition grouping ‘Mahajana Handa’ has accused President Anura Kumara Dissanayake of trying to exercise control over the judiciary by appointing a sitting High Court judge as Additional Secretary to the Justice and National Integration Ministry.

Addressing the media at Dr. N. M. Perera Centre, Punchi Borella, on Tuesday (20) top Opposition spokesman and former External Affairs Minister Prof. G. L. Peiris warned the High Court judge D.M.D.C. Bandara’s appointment was nothing but a direct executive intervention in the judiciary.

Responding to The Island queries, Prof Peiris asked how the government could compel courts to deal with a sitting judge who functioned as Secretary to the Justice and National Integration Ministry.

Prof. Peiris explained that the latest move by the Executive should be examined taking into consideration the attacks on Attorney General Parinda Ranasinghe Jr, PC., the deliberate delaying of the appointment of Auditor General and the controversy over the process of promotions of Judicial Officers, Judges of the High Court and the Court of Appeal in Sri Lanka. Prof. Peiris pointed out that the Bar Association of Sri Lanka (BASL) had raised those controversial promotions with President Anura Kumara Dissanayake.

D.M.D.C. Bandara, Senior Assistant Secretary, Judicial Service Commission, was among altogether 18 High Court judges appointed by President Dissanayake in early Sept this year. The group consisted of 17 Special Class Judicial Officers and a Senior State Counsel serving in the Attorney General’s Department.

Referring to a recent meeting ‘Mahajana Handa’ representatives, including him had with the Mahanayake theras of the Asgiriya and Malwatta Chapters in Kandy, Prof. Peiris said that they had received the blessings of the Mahanayakes to go ahead with what he called a programme of action meant to address major issues.

Prof. Peiris said they would initiate talks with other like-minded political parties and groups in this regard soon. Referring a protest held at the Hulftsdorp on Wednesday (21) demanding the removal of the AG Ranasinghe, Prof. Peiris emphasized that the government’s hand in that demonstration was very clear. President Ranil Wickremesinghe appointed him as the AG in July 2024 with the unanimous backing of the Constitutional Council.

Prof. Peiris said that action was yet to be initiated to appoint new civil society representatives to the Constitutional Council. That issue hadn’t received sufficient public attention, Prof. Peiris said, urging President Dissanayake to come down from his high horse.

Asked whether the President could appoint a sitting judge as an Additional Secretary to a Ministry without consulting the Chief Justice and President of the High Court Judges Association, sources familiar with the issues at hand said that certain appointments could be made on secondment. However, that has to follow the proper procedure, sources said.

The Island sought a response from the Justice and National Integration Ministry to the accusations made by Prof. Peiris on behalf of ‘Mahajana Handa,’ but did not receive one until this edition went to press.

By Shamindra Ferdinando ✍️