The Central Bank has reduced its key policy rates by 25 basis points, bringing the Standing Lending and Deposit Facility rates to 9.25% and 8.25%, respectively. This adjustment, while largely symbolic, underscores the Bank’s commitment to an easing monetary policy.
Since shifting to a more relaxed policy stance in June 2023, the Central Bank has implemented a cumulative 750 basis points of rate cuts. The latest move is intended to encourage further reductions in market lending rates to support economic activity, given the benign inflation outlook.
Despite this rate cut, some segments of the economy were caught off guard, while others expected the move. The Central Bank’s focus remains on stimulating economic growth rather than addressing inflation, which is currently well-controlled.
The Bank’s policy statement highlighted the intention to signal continued easing to prompt banks to lower their lending rates. The overall economic conditions and price stability are seen as balanced, with inflation measured by the Colombo Consumer Price Index at 1.7% for June.