CBSL maintains key rates; Short-term developments on the supply side do not justify a policy tightening – Lanka Business Online

The Monetary Council decided to maintain the rate of the Permanent Deposit Facility (SDFR) and the Permanent Loan Facility (SLFR) rate of the Central Bank at their current levels of 5.00% and 6.00%, respectively. .

The Council said it arrived at this decision after considering macroeconomic conditions and expected developments on the national and global fronts.

The Council reiterated its commitment to keep inflation at target levels over the medium term with appropriate measures, while helping the economy to reach its potential in the coming period.

Inflation has accelerated in recent months due to high food inflation and some acceleration in non-food inflation.

“With the resulting upward adjustments to other market prices, this is likely to cause headline inflation to deviate somewhat from target levels in the near term,” the central bank said.

“Although such short-term supply side developments do not justify a tightening of monetary policy, the measures already taken by the Central Bank on interest rates and market liquidity would help stabilize market pressures. medium-term demand. “

According to estimates by the Census and Statistics Department (DCS), the Sri Lankan economy experienced a strong recovery in the second quarter of 2021, recording real growth of 12.3%, year-on-year, following growth of 4.3%. , year-on-year, in the first quarter of 2021.

Available indicators and projections suggest that the real economy will grow by around 5% in 2021 and gradually shift to a high and sustained growth path over the medium term.

In response to the tightening of monetary policy in August 2021, most of the market deposit and credit rates adjusted upward. In addition, government bond yields saw a sharp upward adjustment with the removal of maximum acceptance rates at primary auctions.

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