Lanka Business Online

Steep Drop

The Central Bank cut its key short-term discount rates by 75 basis points on Friday after its monthly monetary policy meeting on Thursday evening.
The overnight repurchase rate or repo rate was lowered to 7.5 percent, while the reverse repurchase rate or reverse repo was reduced to 9.5 percent. rn

rnThe bank last reduced the rates in May.rn

rnThe Reverse Repo-rate is the rate at which Primary Dealers in Treasury Bills and commercial banks obtain overnight funds, from the Central Bank, by pledging their Treasury Bill or bond holdings as collateral. rn

rnThe Repo-rate is the key benchmark, which sets the floor in the overnight Call Money Market, as it enables lenders to invest excess funds in Treasury Bills and bonds held by the Central Bank. rn

rnIt is also the Central Banks main instrument of signalling the expected direction of overall interest rates to the market.rn

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