Policy Rate

Oct 17, 2014 (LBO) – Sri Lanka’s central bank held policy interest rates at 6.5 and 8.0 percent but said there is further room for banks to reduce lending rates, as inflation continued to be slow the Central Bank in its October monetary policy review. In nominal terms, most market interest rates are at historic lows, although there is further room for these rates to reduce in relation to the low inflation environment. Central Bank said in a media release.

However in August credit extended to the private sector by commercial banks increased by 47.7 billion rupees indicating a turnaround in the behavior of bank credit.

The monetary authority says is expected that credit disbursements to the private sector from commercial banks would continue to grow given the continued growth in economic activity and the relatively low market interest rates.

The island inflation continued to remain in low single digit levels, as headline inflation on a year-on-year (Y-o-Y) basis remained unchanged at 3.5 percent in September 2014 while declining on an annual average basis to 4.2 per cent from 4.5 percent in the previous month.

Core inflation (Y-o-Y) meanwhile, decelerated to 3.7 percent in September 2014 from 3.9 per cent in August 2014.