The central bank of Sri Lanka supported overnight prices at around twenty basis points above its policy level, which on 31 May fell 50 basis points and, from the last policy conference, official information showed that the de facto target rate had dropped to a further eighty-one basis points.
On its policy corridor, the central bank cut the level of surplus liquidity at the last monetary policy conference in the midst of fragile personal credit from 8.00 to 7.5percent. The policy announcement will take place on 11 July.
The rate at which banks deposit cash in excess of the requirements of statutory reserve when the loans are slow and there is a’ balance of payments ‘ surplus in the soft-powered Sri Lankan monetary system is a floor rate (standard liquidity deposit).
In the days prior to the rate cut, the central bank supported overnight prices of around 8.55%. Overnight rates began to float and, after private credit began contracting in early 2019, no reverse repo printing stabilization of the cash began.
As the Central Bank’s national operations department began to drop by combining overnight and term refreshments, prices began to float around 50 basis points above ground prices with a term refresh auction of approximately 8,54 to 8,56 percent.