The Central Bank releasing the monetary policy review on Friday said based on the current developments and outlook for key macroeconomic variables, the Monetary Board of the Central Bank was of the view that the continuation of the current monetary stance is suitable.
Accordingly, the Monetary Board at its meeting held on 10 May has decided to maintain the Standing Deposit Facility Rate (SDFR) and the Standing Lending Facility Rate (SLFR) of the Central Bank unchanged at 7.25 percent and 8.50 percent, respectively while the Statutory Reserve Ratio remains at 7.50 percent.
In arriving at this decision, the Board took into consideration the recent global market developments, the macroeconomic impact of recent adjustments in administered prices, and the fact that more time is needed to assess the market and economic impact of the policy rate adjustment in April 2018.
The Board’s decision aims at stabilizing inflation in mid-single digit levels in the medium term, thereby contributing to a favorable growth outlook for the Sri Lankan economy, the Central Bank said.
Both national and Colombo inflation continued to decelerate to reach low single digit levels, as volatile food prices declined due to favorable domestic supply conditions while core inflation remained subdued indicating contained demand pressures, while inflation expectations continued to decline. However, the Bank expects a temporary uptick in inflation in the short term due to the impact of upward price revisions to domestic petroleum products, LP gas and milk powder.
Economic growth is expected to recover in 2018 after the sub-par growth performance in 2017.