Friday, April 3, 2020

Sri Lanka cuts rate 25 bps in 2nd emergency move

    Sri Lanka's central bank lowered its two key interest rates by a further 25 basis points at a second unscheduled monetary policy meeting, saying the move should help ease market conditions and provide further relief to businesses and households affected by the outbreak of the coronavirus and the restrictions put in place to contain its spread.
     The Central Bank of Sri Lanka (CBSL) cut its Standing Deposit Facility Rate (SDFR) and the Standing Lending Facility Rate (SLFR) to 6.0 percent and 7.0 percent respectively.
     CBSL was the first central bank worldwide to lower its rate in January in response to the growing economic uncertainty surrounding the outbreak of COVID-19 in China.
      At its scheduled policy meeting on March 4, the central bank maintained its rate but at an urgent meeting on March 16 it then lowered the rates by 25 basis points along with a 100 point cut in its reserve ratio "in light of the urgent need to support economic activity with the rapid spread" of the virus.
      CBSL has now cut its policy rates five times and by a total of 200 basis points since May 2019, including the three rate cuts this year.
      The central bank said there would not be a monetary policy announcement on April 9, as scheduled, but the policy stance may be reviewed and changed if necessary "as and when required."

     The Central Bank of Sri Lanka issued the following statement:

"The Monetary Board of the Central Bank of Sri Lanka, on 03 April 2020, decided to reduce the Standing Deposit Facility Rate (SDFR) and the Standing Lending Facility Rate (SLFR) of the Central Bank by 25 basis points to 6.00 per cent and 7.00 per cent, respectively, effective from the close of business on 03 April 2020. This decision will complement the measures taken thus far to ease market conditions, and enable the domestic financial market to provide further relief to businesses and individuals affected by the outbreak of the COVID-19 pandemic and restrictions placed to contain its spread within the country.
Note: There will be no monetary policy announcement on 09 April 2020 as scheduled. However, the Monetary Board may review the monetary policy stance of the Central Bank and make necessary changes as and when required in consideration of economic and market developments. 


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