{"id":170229,"date":"2020-05-08T12:09:19","date_gmt":"2020-05-08T16:09:19","guid":{"rendered":"https:\/\/www.countingpips.com\/?p=170229"},"modified":"2020-05-08T09:54:05","modified_gmt":"2020-05-08T13:54:05","slug":"sri-lanka-cuts-rate-4th-time-in-2020-to-support-economy","status":"publish","type":"post","link":"https:\/\/www.investmacro.com\/forex\/2020\/05\/sri-lanka-cuts-rate-4th-time-in-2020-to-support-economy\/","title":{"rendered":"Sri Lanka cuts rate 4th time in 2020 to support economy"},"content":{"rendered":"
May 8, 2020<\/div>
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By CentralBankNews.info<\/u><\/a><\/p>\n

Sri Lanka’s central bank cut its benchmark interest rates for the fourth time this year and for the third time at an unscheduled meeting by its monetary board, saying the decision was taken “considering the necessity to further support the economy to weather the adverse economic impact caused by the COVID-19 pandemic, given subdued inflationary pressures.”
\nThe Central Bank of Sri Lanka (CBSL) cut its Standing Deposit Facility Rate (SDFR) and the Standing Lending Facility Rate (SLFR) by another 50 basis points to 5.50 percent and 6.50 percent respectively.
\nThe decision was taken at an extraordinary monetary board meeting on May 6.
\nCBSL has now cut its benchmark deposit rate by 150 basis this year following cuts in January – when it was the first central bank worldwide to refer to the threat from the coronavirus – then March and April, with the latter two rate cuts decided at emergency meetings.
\nThe central bank has been easing its monetary policy since May 2019 and has cut the rate by a total of 250 basis points. On March 16 CBSL also lowered its statutory reserve ratio by 100 points.
\nReflecting the cut in its benchmark interest rates since May 2019, the central bank on April 16 allowed its Bank Rate to automatically adjust in line with the SLFR, with a margin of 300 basis points, to 10.0 percent from 15.0 percent.
\nIt was the first time the central bank changed the Bank Rate, which functions as an emergency funding rate for commercial banks. It had been at 15.0 percent since August 2003
\nThe bank’s board said it was disappointed market lending rates had not decline in line with its easier policy and “urged” financial institutions to lower their lending rates “without further delay.”
\nIf market rates do not come down, \u00a0CBSL said it would be “compelled to take appropriate regulatory actions to bring down market lending rates.”
\nCBSL has often voiced its disappointment that banks did not pass on its rate cuts but today’s threat of regulatory action is unusually blunt for a central bank.
\nThe central bank added it would not be announcing a monetary policy decision on May 21, as scheduled, and its monetary board may review policy and make necessary changes “as and when required in consideration of economic and market developments.”
\nIn its annual report for 2019, released last week, the central bank forecast growth this year of around 1.5 percent, down from a low level of 2.3 percent in 2019 due to terror attacks, with its economy recovering faster than the global economy as domestic demand accounts for a significant portion of aggregate demand.
\n<\/a><\/p>\n

<\/div>\n

The Central Bank of Sri Lanka issued the following statement:<\/p>\n

“The Monetary Board of the Central Bank of Sri Lanka, at a special meeting held on 06 May 2020, reviewed the current monetary policy stance 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 5.50 per cent and 6.50 per cent, respectively, effective from the close of business on 06 May 2020. The Board arrived at this decision considering the necessity to further support the economy to weather the adverse economic impact caused by the COVID-19 pandemic, given subdued inflationary pressures. With this decision, policy interest rates of the Central Bank have been reduced by 150 basis points thus far in 2020, in addition to the other measures taken to ease monetary conditions in the market.<\/span><\/p>\n

The Monetary Board noted, with disappointment, that market lending rates have not declined in line with the series of measures taken to ease monetary policy and monetary conditions thus far during the year. Therefore, financial institutions are urged to reduce lending rates without further delay, failing which, the Central Bank will be compelled to take appropriate regulatory action to bring down market lending rates.<\/div>\n\n\n\n\n\n\n\n
Monetary Policy Decision:<\/span><\/strong><\/td>\nPolicy rates reduced by 50 basis points<\/span><\/strong><\/td>\n<\/tr>\n
Standing Deposit Facility Rate (SDFR)<\/span><\/td>\n5.50%<\/span><\/td>\n<\/tr>\n
Standing Lending Facility Rate (SLFR)<\/span><\/td>\n6.50%<\/span><\/td>\n<\/tr>\n
Bank Rate<\/span><\/td>\n9.50%<\/span><\/td>\n<\/tr>\n
Statutory Reserve Ratio (SRR)<\/span><\/td>\n4.00% (unchanged)”<\/span><\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n
\u00a0 \u00a0 www.CentralBankNews.info<\/a><\/div>\n
<\/div>\n

 <\/p>\n","protected":false},"excerpt":{"rendered":"

By CentralBankNews.info Sri Lanka’s central bank cut its benchmark interest rates for the fourth time this year and for the third time at an unscheduled meeting by its monetary board, saying the decision was taken “considering the necessity to further support the economy to weather the adverse economic impact caused by the COVID-19 pandemic, given […]<\/p>\n","protected":false},"author":3,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[],"tags":[],"class_list":["post-170229","post","type-post","status-publish","format-standard","hentry","no-post-thumbnail"],"_links":{"self":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/posts\/170229","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/users\/3"}],"replies":[{"embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/comments?post=170229"}],"version-history":[{"count":2,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/posts\/170229\/revisions"}],"predecessor-version":[{"id":170234,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/posts\/170229\/revisions\/170234"}],"wp:attachment":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/media?parent=170229"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/categories?post=170229"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/tags?post=170229"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}