Monetary Policy Review: No. 06 – August 2023
Monetary Policy Review: No. 06 – August 2023
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Monetary Policy Review: No. 06 - August 2023

Monetary Policy Review: No. 06 - August 2023
The Central Bank of Sri Lanka maintains policy interest rates
at their current levels
The Monetary Board of the Central Bank of Sri Lanka, at its meeting held on 23 August 2023,
decided to maintain the Standing Deposit Facility Rate (SDFR) and the Standing Lending Facility
Rate (SLFR) of the Central Bank at their current levels of 11.00 per cent and 12.00 per cent,
respectively. The Board arrived at this decision following a careful analysis of current and
expected developments in the domestic as well as the global economy, while noting the
significant easing of monetary conditions effected since June 2023. The Monetary Board took
note of the downward adjustment of market interest rates in response to monetary policy easing
measures implemented thus far and the need to allow space for further adjustment of market
interest rates swiftly. However, the Board observed that market interest rates of certain lending
products remain excessive and are not in line with the current monetary policy stance. Moreover,
the Board anticipates a faster reduction in overall market lending interest rates in line with the
recent monetary policy easing measures. Accordingly, the Board decided to adopt targeted
administrative measures to reduce specific lending interest rates that it considered to be
excessive and direct the licensed banks to reduce overall rupee lending interest rates by an
appropriate margin in the period ahead.
The disinflation trend continues, with headline inflation reaching single digit levels
Headline inflation, measured by the year-on-year change in the Colombo Consumer Price Index
(CCPI, 2021=100), decelerated to 6.3 per cent in July 2023, reaching single digit levels for the
first time since November 2021. Following a similar trend, headline inflation, based on the
National Consumer Price Index (NCPI, 2021=100), also decelerated to 4.6 per cent in July 2023
(year-on-year). The moderation in headline inflation was mainly driven by the softening of energy
and food inflation, along with the favourable statistical base effect. Meanwhile, CCPI and NCPI
based core inflation, which reflects underlying demand pressures in the economy, moderated to
6.1 per cent and 6.3 per cent, respectively, in July 2023 (year-on-year). Headline inflation is
expected to moderate further over the next few months and stabilise around mid-single digit
levels over the medium term.

Source :CBSL  Readmore