CB to maintain interest rates at current level

The Central Bank said on Tuesday it had decided to maintain its Standing Deposit Facility Rate and Standing Lending Facility Rate at the current level of 15.50 percent and 16.50 percent, respectively.

Its Monetary Board made the decision after considering recent and expected developments related to both the domestic and global economy as well as macroeconomic projections, the bank said in a press release.

The board noted that sticking to a tight monetary policy stance is necessary to ensure that monetary conditions remain sufficiently tight to facilitate the continuation of the ongoing disinflation process amidst the improvements in market sentiments following the finalisation of the Extended Fund Facility (EFF) from the International Monetary Fund (IMF) and the downward shift in elevated market interest rates reflecting the falling risk premia.

The Central Bank said inflation (year-on-year) based on the Colombo Consumer Price Index (CCPI) reduced for the sixth consecutive month in March 2023.

Despite a sizable impact from the recent hike in electricity tariffs and envisaged second round effects of previous hikes, headline inflation moderated in March 2023, mainly reflecting a larger-than-expected reduction in food inflation, the Bank said.

Inflation is expected to reduce faster from April 2023 with the reduction in domestic prices of essentials following the greater pass through of the moderation of global commodity prices and the recent appreciation of the Sri Lanka rupee, and the large disinflationary impact arising from the base effect, it said in a press release.

Headline inflation is projected to reach single digit levels by end 2023 and stabilise at desired levels thereafter over the medium term, the Central Bank said.