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Colombo: Sri Lanka central bank cut his key rates by 200 basis points on Thursday, in line with expectations, as inflation continued to slow and focus returned to reviving economic growth after a bailout from the International Monetary Fund.
The Central Bank of Sri Lanka (CBSL) cut the perpetual deposit rate and perpetual lending rate to 11% and 12% respectively from 13% and 14% previously. This follows a 250 basis point cut at the last policy meeting in June.
The island nation plunged into crisis last year as its foreign exchange reserves depleted and food and energy prices soared. Last July, protest mobs forced the ouster of then-President Gotabaya Rajapaksa.
The central bank raised interest rates by 950 basis points last year to curb inflation and by 100 basis points on March 3.
President Ranil Wickremesinghe took over in July and negotiated a $2.9 billion bailout from the International Monetary Fund (IMF) in March.
“We urge the banking and financial sector to transfer the benefit of this significant easing of monetary policy to individuals and companies, thus supporting economic activity for recovery in the coming period,” CBSL said in a statement.
Sri Lanka key The inflation index peaked at 70% year-on-year in September and has gradually declined. It was at 12% in June.
Demantha Mathew, Head of Research at First Capital, said that CBSL will try to implement the domestic debt restructuring plan as soon as possible.
He added, “Now that they have cut interest rates quickly, they will issue very long-term bonds and reduce borrowing costs for the government. Borrowing costs will drop between 11%-13% as rates will start to trend downward.”
The Central Bank of Sri Lanka (CBSL) cut the perpetual deposit rate and perpetual lending rate to 11% and 12% respectively from 13% and 14% previously. This follows a 250 basis point cut at the last policy meeting in June.
The island nation plunged into crisis last year as its foreign exchange reserves depleted and food and energy prices soared. Last July, protest mobs forced the ouster of then-President Gotabaya Rajapaksa.
The central bank raised interest rates by 950 basis points last year to curb inflation and by 100 basis points on March 3.
President Ranil Wickremesinghe took over in July and negotiated a $2.9 billion bailout from the International Monetary Fund (IMF) in March.
“We urge the banking and financial sector to transfer the benefit of this significant easing of monetary policy to individuals and companies, thus supporting economic activity for recovery in the coming period,” CBSL said in a statement.
Sri Lanka key The inflation index peaked at 70% year-on-year in September and has gradually declined. It was at 12% in June.
Demantha Mathew, Head of Research at First Capital, said that CBSL will try to implement the domestic debt restructuring plan as soon as possible.
He added, “Now that they have cut interest rates quickly, they will issue very long-term bonds and reduce borrowing costs for the government. Borrowing costs will drop between 11%-13% as rates will start to trend downward.”
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