(Bloomberg) -- Sri Lanka kept its benchmark interest rate unchanged, even as inflation accelerated to the highest level in four months.
Governor Indrajit Coomaraswamy held the standing lending facility rate at 8%, the Central Bank of Sri Lanka said in a statement in Colombo on Friday. The decision was predicted by all six economists surveyed by Bloomberg.
Key Insights
- The central bank maintained the standing deposit facility rate at 7%
- Consumer prices rose to 5% in September, the highest level since May, but was still within the central bank’s desired range of 4%-6%. The central bank said Friday that it expects inflation to remain within that level
- Policy makers have cut rates twice this year -- in May and August -- to bolster economic growth, hit by the Easter Sunday bomb attacks that killed more than 250 people
- While economic expansion slowed to a more than five-year low of 1.6% in the quarter ended June, the central bank sees growth recovering gradually
- Any further reduction in rate would likely increase foreign outflows from the country, leading to further depreciation of the rupee, First Capital Research in Colombo said in a note before the announcement
- On Sept. 24, the monetary authority ordered banks to lower market lending rates to help enhance the efficiency of the transmission of previous rate cuts
- On Friday, the central bank said it expects faster reduction in bank lending rates
- Today’s rate decision is likely the last before presidential elections scheduled for Nov. 16 and comes amid intensifying global risks and monetary easing
- To read the full statement of the central bank, click here