Sri Lanka’s Central Bank releasing the monetary policy review on Thursday said the Monetary Board has decided to continue the current accommodative monetary policy stance.
Accordingly, the Monetary Board of the Central Bank of Sri Lanka, at its meeting held on 19 May 2021, has decided to maintain the Standing Deposit Facility Rate (SDFR) and the Standing Lending Facility Rate (SLFR) of the Central Bank at their current levels of 4.50 percent and 5.50 percent, respectively.
The Board arrived at this decision after carefully considering the macroeconomic conditions and expected developments on the domestic and global fronts, the Bank said in its review.
The Board said in the context of the prevailing low inflation environment and well anchored inflation expectations, and the renewed challenges posed by the third wave of the COVID-19 pandemic, it remains committed to maintaining the current accommodative monetary policy stance to support the sustained revival of the economy.
The Monetary Board noted that although the third wave of the COVID-19 pandemic has disrupted the ongoing recovery of economic activity, its adverse effects on economic activity are expected to be lesser than during the first two waves.
The external sector remains resilient despite a multitude of challenges, the Bank said. While the trade deficit widened in March 2021 as increase in import expenditure was higher than the increase in export earnings, notable increase in workers’ remittances continued in the first four months of 2021.
Inflation is expected to remain within 4-6 percent range in the near to medium term, while any pressures over the medium term will be addressed with appropriate measures, the Board said.
In consideration of the current and expected macroeconomic developments, the Monetary Board was of the view that the current accommodative monetary policy stance is appropriate.