SL tightens monetary policy with significant increase of interest rates

Colombo: As economic crisis continues, the Central Bank of Sri Lanka has tightened its monetary policy with a significant increase of interest rates amid inflationary pressure.

Issuing a statement on Friday, the bank announced the increase of the deposit facility rate and the standing lending facility rate by 700 basis points to 13.5 per cent and 14.5 per cent, respectively, reports Xinhua news agency.

The central bank said it had noted inflationary pressures that could further intensify in the period ahead, driven by the build-up of aggregate demand, domestic supply disruptions, exchange rate depreciation and elevated prices of commodities globally.

Therefore the bank was of the view that a substantial policy response is imperative to pre-empt the escalation of adverse inflationary expectations, to provide the required impetus to stabilise the exchange rate and correct anomalies observed in the market interest rate structure.

Sri Lanka has for days been facing public protests calling for immediate measures to be taken by the government to solve the economic crisis featuring shortages of foreign exchange, fuel and other essential supplies as well as rising inflation.