(LANKAPUVATH | COLOMBO) – The licensed commercial banks (LCBs) are expected to bring down the lending rate for businesses now that the Central Bank of Sri Lanka (CBSL) has relaxed its monetary policy stance, CBSL Governor Dr. Nandalal Weerasinghe says.
Addressing the special press briefing held in Colombo to announce the CBSL’s Monetary Policy Review today (June 01), Dr. Weerasinghe said the inflation is now coming towards the target range much earlier than expected, supported by the currency appreciation, the adjustment in the fuel and petroleum prices and global prices.
Taking this into account, the Central Bank arrived at the decision to relax monetary conditions and made a strong adjustment of policy rates, Dr. Weerasinghe continued, adding that he is hopeful the LCBs will bring down the lending rates for businesses.
The Central Bank today cut the interest rates for the first time in nearly three years, lowering the Standing Lending Facility Rate (SLFR) and Standing Deposit Facility Rate (SDFR) to 14.00 percent and 13.00 percent, respectively.
The decision was taken at the Central Bank’s Monetary Board meeting on Wednesday (May 31), in a bid to ease monetary conditions in line with the faster-than-expected slowing of inflation, gradual dissipation of inflationary pressures and further anchoring of inflation expectations.
“Today is the start of the policy easing cycle. We reduced our policy rates significantly by 250 basis points,” Dr. Weerasinghe told the reporters.
Speaking further, he said the Central Bank has purchased USD 1,671 million from the market on the net basis so far this year, while USD 662 million was purchased in the month of May alone, marking the highest monthly purchase.
The Central Bank governor also expressed confidence in bringing down the inflation to a single digit by the end of July.
Meanwhile, Sri Lanka expects to settle the USD 200 million borrowed from Bangladesh by August or September this year, Dr. Weerasinghe added.
