FINANCIAL CHRONICLE™
Dear Reader,

Registration with the Sri Lanka FINANCIAL CHRONICLE™️ would enable you to enjoy an array of other services such as Member Rankings, User Groups, Own Posts & Profile, Exclusive Research, Live Chat Box etc..

All information contained in this forum is subject to Disclaimer Notice published.


Thank You
FINANCIAL CHRONICLE™️
www.srilankachronicle.com


Join the forum, it's quick and easy

FINANCIAL CHRONICLE™
Dear Reader,

Registration with the Sri Lanka FINANCIAL CHRONICLE™️ would enable you to enjoy an array of other services such as Member Rankings, User Groups, Own Posts & Profile, Exclusive Research, Live Chat Box etc..

All information contained in this forum is subject to Disclaimer Notice published.


Thank You
FINANCIAL CHRONICLE™️
www.srilankachronicle.com
FINANCIAL CHRONICLE™
Would you like to react to this message? Create an account in a few clicks or log in to continue.
FINANCIAL CHRONICLE™

Encyclopedia of Latest news, reviews, discussions and analysis of stock market and investment opportunities in Sri Lanka

Click Link to get instant AI answers to all business queries.
Click Link to find latest Economic Outlook of Sri Lanka
Click Link to view latest Research and Analysis of the key Sectors and Industries of Sri Lanka
Worried about Paying Taxes? Click Link to find answers to all your Tax related matters
Do you have a legal issues? Find instant answers to all Sri Lanka Legal queries. Click Link
Latest images

Latest topics

» FINANCE AND LEASING SECTOR
by SL-INVESTOR Today at 12:48 am

» HSENID BUSINESS SOLUTIONS PLC (HBS.N0000)
by ErangaDS Wed Jun 19, 2024 9:21 pm

» How will proposed Tax Reforms affect Sri Lankans in 2025
by Quibit Wed Jun 19, 2024 9:27 am

» Alibaba & 23 Thieves
by ChooBoy Wed Jun 19, 2024 12:23 am

» Falsified accounts and financial misrepresentation at Arpico Insurance PLC (AINS)
by ChooBoy Tue Jun 18, 2024 11:31 pm

» Impact of IMF reforms to Sri Lanka Economy
by D.G.Dayaratne Mon Jun 17, 2024 6:36 pm

» Richard Pieris Finance Ltd continue to endanger the Depositors with negative performance
by ddindika Mon Jun 17, 2024 3:17 pm

» Richard Pieris Group: Mismanaged?
by Biggy Sun Jun 16, 2024 10:02 am

» Richard Pieris Exports reports 97% decline in Net Profits
by Biggy Sat Jun 15, 2024 11:26 am

» Do your own Stock Market Research using AI Tools
by Quibit Fri Jun 14, 2024 10:50 am

» What will happen tomorrow?
by cheetah Thu Jun 13, 2024 12:07 pm

» Focus on Government controlled entities
by ErangaDS Mon Jun 10, 2024 4:15 pm

» Colombo Stock Market: Over Valued against USD!
by God Father Mon Jun 03, 2024 3:17 pm

» Financial Woes at Richard Pieris Group
by DeepFreakingValue Sat Jun 01, 2024 11:29 pm

» Report a Tax Evasion and Get Rewarded upto 15%
by God Father Fri May 31, 2024 11:51 am

» LankaGPT Platform Launched in Sri Lanka
by God Father Wed May 29, 2024 11:46 pm

» Sri Lanka’s Popularity Is Surging With Travelers. Here’s Where To Go
by ResearchMan Wed May 29, 2024 1:10 pm

» CDB Non voting
by buddikasmart Wed May 29, 2024 8:03 am

» Will share market be taxed after new Gazette
by D.G.Dayaratne Mon May 27, 2024 2:14 pm

» PEOPLE'S INSURANCE PLC (PINS.N0000)
by Ekanayake90 Mon May 27, 2024 7:29 am

» Seylan Bank did not pay final coupon of expired debentures
by Gaudente Wed May 22, 2024 2:32 pm

» Sri Lanka: Stock Market Fraudsters with Criminal Prosecutions
by agentnrox Wed May 22, 2024 1:50 pm

» Richard Pieris Exports PLC (REXP.N0000) future looks bleak!
by God Father Mon May 20, 2024 10:08 pm

LISTED COMPANIES

Submit Post
ශ්‍රී ලංකා මූල්‍ය වංශකථාව - සිංහල
Submit Post


CONATCT US


Send your suggestions and comments

* - required fields

Read FINANCIAL CHRONICLE™ Disclaimer



EXPERT CHRONICLE™

ECONOMIC CHRONICLE

GROSS DOMESTIC PRODUCT (GDP)



CHRONICLE™ YouTube


You are not connected. Please login or register

Central Bank of Sri Lanka Reduces its Policy Interest Rates

2 posters

Go down  Message [Page 1 of 1]

Miss-Sangeetha

Miss-Sangeetha
Moderator
Moderator

The Monetary Board of the Central Bank of Sri Lanka, at its meeting held on 30 May 2019, decided to reduce the Standing Deposit Facility Rate (SDFR) and the Standing Lending Facility Rate (SLFR) of the Central Bank by 50 basis points to 7.50 per cent and 8.50 per cent, respectively. The Board arrived at this decision following a careful analysis of current and expected developments in the domestic economy and the financial market as well as the global economy, with the broad aim of stabilising inflation at mid-single digit levels in the medium term to enable the economy to reach its potential.

A dovish approach to monetary policy is observed globally

Driven by a number of factors such as increased trade tensions, weakened business confidence and softened external demand, a slowdown in global economic growth is observed. This has prompted key advanced economies to become increasingly dovish, while several emerging market economies have also relaxed their monetary policy stance to support economic activity, given subdued inflation pressures. Meanwhile, despite the slowdown in global growth, international crude oil prices have remained elevated due to geopolitical uncertainties.

Subpar economic growth is likely to be further affected by the Easter Sunday attacks

Following the modest growth in 2018, the economy is expected to have grown at a higher pace during the first quarter of 2019, mainly due to improved performance in Agriculture and Industry-related activities. However, the Easter Sunday attacks have affected confidence and sentiments of economic agents, particularly disrupting tourism and related activities. Although normalcy is gradually returning to economic activity, a lower than initially projected growth could be anticipated during 2019.

Market lending rates remained downward rigid, despite the measures already taken Sizable liquidity injections through the reductions in the Statutory Reserve Ratio (SRR) along with appropriate and prudent open market operations (OMOs) have resulted in a reduction in the Average Weighted Call Money Rate (AWCMR) by around 50 basis points so far in 2019. Yields on Government securities have also adjusted downward sharply during the year. In the meantime, considering the high nominal and real interest rates on deposit and lending products, the Central Bank imposed maximum interest rates on deposit products in April 2019, thus reducing the cost of funds of financial institutions, enabling them to reduce lending rates and enhance credit flows to the real economy.

In spite of liquidity injections, decline in AWCMR and yields on Government securities, as well as the recently introduced maximum interest rates on deposit products, market lending rates have failed to show any sign of commensurate downward adjustment.

Amidst elevated market lending rates, private sector credit contracted notably

Following a higher than projected credit expansion, particularly in the latter part of 2018, credit extended to the private sector by commercial banks contracted, in absolute terms on a cumulative basis, during the first four months of 2019. High market lending rates, sluggish growth in economic activity, subdued business confidence, as well as the settlement of arrears by the government on account of various projects which enabled repayments to the banking sector, were amongst the factors which contributed to this contraction. Driven by the slowdown in private sector credit, the year-on-year growth of broad money (M2b) also decelerated so far in 2019.

Improvements in external sector conditions are observed, particularly in relation to the trade balance

The trade deficit narrowed with increased performance in export earnings, while import expenditure declined sharply during the first three months of 2019 mainly in response to the flexible exchange rate policy maintained by the Central Bank ahead of adopting the proposed flexible inflation targeting monetary policy framework. The improvement in the trade deficit is likely to negate the adverse impact on the current account arising from the slowdown in services exports caused by the contraction in tourism in 2019. Nevertheless, it is expected that earnings from tourism would rebound with the support of improved security conditions and the relaxation of travel advisories by several key countries of origin of tourists, along with recently introduced policy measures and promotional campaigns to revive the sector. Meanwhile, the receipt of the sixth tranche under the Extended Fund Facility programme with the International Monetary Fund (IMF-EFF) in May 2019 is expected to boost investor sentiments. With these developments, the Sri Lankan rupee has recorded a cumulative appreciation of 3.7 per cent against the US dollar so far during the year. Gross official reserves are estimated at US dollars 7.2 billion at end April 2019, providing an import cover of 4.1 months.

Despite transitory upticks, a threat to the inflation outlook is not anticipated for the medium term Headline inflation and core inflation, as measured by the year-on-year change in both Colombo Consumer Price Index (CCPI) and National Consumer Price Index (NCPI), showed some acceleration during the year, partly due to the lagged effect of the sharp depreciation of the rupee during 2018. With subdued aggregate demand and well anchored inflation expectations, the recent acceleration in inflation is projected to be short-lived. Accordingly, inflation is likely to remain in the desired 4-6 per cent range in 2019 and beyond, supported by appropriate policy measures.

The monetary policy decision is expected to induce a reduction in market lending rates

At the last review of the monetary policy stance, the Central Bank provided forward guidance of a possible policy relaxation, if the current trends in the global financial markets, trade balance, and credit growth continue. These trends have continued, and in addition, the economy has been affected by the Easter Sunday attacks and its adverse spillover effects on related sectors. Accordingly, the Monetary Board was of the view that a relaxation of the monetary policy stance is appropriate, and decided to reduce the Standing Deposit Facility Rate (SDFR) and the Standing Lending Facility Rate (SLFR) of the Central Bank by 50 basis points to 7.50 per cent and 8.50 per cent, respectively. Along with the developments in the domestic financial markets so far during the year, the monetary policy decision to reduce policy interest rates is expected to induce a swift and sizable reduction in market lending rates.

Source-Adaderana

Teller

Teller
Moderator
Moderator

Thanks. Its a good move

Back to top  Message [Page 1 of 1]

Permissions in this forum:
You cannot reply to topics in this forum