Sri Lanka Equity Forum
Dear Reader,

Registration with the Sri Lanka Equity Forum 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
Sri Lanka Equity Forum

Discussion Forum for Stock Market Investors in Sri Lanka

සිංහල පරිවර්තනය
Submit Post
Submit Post
Market Place

Add an ad

View all ads

Latest topics

» lOFC definitely will hit 6/-
by stockback Today at 2:51 am

» CIND , 10% guaranteed return
by Teller Today at 2:46 am

» Look PAP Amazing company
by Teller Today at 2:44 am

» Bottom of market
by Teller Yesterday at 10:52 pm

» Triple Top Reversal pattern
by Teller Yesterday at 9:16 pm

» Keep eye on Politics
by Yahapalanaya Yesterday at 6:25 pm

by mahasona2 Yesterday at 1:00 pm

by mahasona2 Yesterday at 12:54 pm

» Why AAIC Should trade above RS.50/-
by wisdom79 Yesterday at 12:38 pm

by Nuwan Samarawickrama Yesterday at 10:33 am

» Aluf will be better
by wisdom79 Yesterday at 8:50 am

» Stop promoting garbage. Don’t get deceived.
by wisdom79 Yesterday at 8:46 am

» RICH is not bad @ 9/-
by Teller Yesterday at 3:18 am

» BFN බොරු සෙලින් දාලා කොහොම හරි 11 වගේ ගානට 500000 එකතු කරගන්න කියලා අර 14 ට ලක්ශයක් සෙලින් දැම්මේ මේ ටේලර් මහත්තයාම තමයි
by Teller Yesterday at 3:16 am

» Be careful with HVA and LITE
by Teller Yesterday at 3:11 am

» WATA future looks good
by Teller Wed Jun 19, 2019 10:00 pm

» If i am the EPF buyer,I will go for PLC
by Teller Wed Jun 19, 2019 9:59 pm

» LLUB Pattern reversed. Good buy @60, target +20%
by Teller Wed Jun 19, 2019 9:58 pm

by Teller Wed Jun 19, 2019 9:04 am

» Why we should buy AEL.N0000…?
by Miss-Sangeetha Wed Jun 19, 2019 7:45 am

» The Curse Of AEL
by Yahapalanaya Tue Jun 18, 2019 11:06 pm

» Senthilverl Drives Sri Lanka Stock Market Turnover to hit Rs.2 billion
by Yahapalanaya Tue Jun 18, 2019 11:03 pm

» 8 Finance companaies to be closed very soon
by samaritan Tue Jun 18, 2019 8:52 pm

» Copreus (Pvt) Ltd - Need some Information
by Copreus Tue Jun 18, 2019 12:44 pm

» BALA can come down to 9/-
by Teller Tue Jun 18, 2019 12:27 am

» MARKET UP......BUT BFL....GRAN....TAFL......
by Trader321 Mon Jun 17, 2019 4:31 pm

by Trader321 Mon Jun 17, 2019 4:29 pm

» MGT.N0000 & TJL.N0000 keep eye.
by Trader321 Mon Jun 17, 2019 3:58 pm

» TAFL.N000 / GRAN.N0000
by Trader321 Mon Jun 17, 2019 3:57 pm

» Market will test 4700
by karuna2 Mon Jun 17, 2019 1:08 pm

» Loss-making stockbrokers may not last six months
by Miss-Sangeetha Mon Jun 17, 2019 12:51 pm

» Those who are having SUGA And HDEV (Hotel Developers)coming week you all can excpect Good News to come
by Capton KIng Cool Mon Jun 17, 2019 12:25 pm

» ECL wAS 2.8 Last week Today 4.7 .Whats Next? Acme?
by Capton KIng Cool Mon Jun 17, 2019 9:02 am

by Teller Sat Jun 15, 2019 6:18 pm

» Look APLA its trending to 98LKR
by Teller Sat Jun 15, 2019 2:24 am

» SAMP Oversubscribed?
by Teller Sat Jun 15, 2019 2:13 am

» Apple Lost Sales in Europe to Chinese Firms Ahead of US Huawei Crackdown
by Teller Sat Jun 15, 2019 1:44 am

» Market is On The Rise.Market PER 8.5, EPF Has entered the market curently they are buying AEL (Access Enginering)There'r lot of counters. Rich,TkyoAsir,Amsl,Osea.CINV.EXPO,JINS and Tyre.good luck
by wisdom79 Fri Jun 14, 2019 7:55 pm

» NEXT RUN People's leasing and Finance WAIT AND WATCH ENJOY RIDE..
by ddrperera Thu Jun 13, 2019 9:25 pm

» EPF Investment in Unquated copmanies .Who is responsible Previous Centeral Bank Governer and Former Regime.
by Capton KIng Cool Thu Jun 13, 2019 9:05 am

» PDL (Property Development)
by Capton KIng Cool Thu Jun 13, 2019 8:51 am

» EAST Steady at 18
by Cricketman Thu Jun 13, 2019 5:28 am

» Guys what happen these days
by Yahapalanaya Thu Jun 13, 2019 2:29 am

You are not connected. Please login or register

Sri Lanka Equity Forum » Stock Market Talk » Central Bank of Sri Lanka Reduces its Policy Interest Rates

Central Bank of Sri Lanka Reduces its Policy Interest Rates

Go down  Message [Page 1 of 1]


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.



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