Sri Lanka’s Central Bank increases policy rates by 50bps

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July 28, 2016 (LBO) – The Monetary Board has decided to increase the main policy interest rates of the Central Bank, the Standing Deposit Facility Rate and the Standing Lending Facility Rate, by 50 basis points each to 7.00 percent and 8.50 percent respectively, effective from the close of business on 28 July 2016.

“The Monetary Board was of the view that further tightening of monetary policy is required to curb excessive demand in order to pre-empt the escalation of inflationary pressures and to support the balance of payments,” Central Bank said.

“The Board is of the view that tightening of monetary policy in a forward looking manner will ensure the maintenance of inflation at mid-single digits in the medium term, which is supportive of the growth momentum in the economy.”

Central Bank said the current policy adjustment is not expected to have a significant impact on the long end of the yield curve.

The Central Bank further said that they will continue to monitor macroeconomic developments closely and make appropriate adjustments to the monetary policy stance, as necessary.