Oct 22, 2020

CBSL keeps policy rates unchanged Featured

The Central Bank has kept key policy rates unchanged at the latest monetary policy review citing overall decline in market lending rates, pick up in private credit and benign inflation.

Accordingly, Standing Deposit Facility Rate (SDFR) is maintained at 4.5 percent and Standing Lending Facility Rate (SLFR) is maintained at 5.5 percent.

The Central Bank said the Average Weighted Prime Lending Rate (AWPR) declined to historic lows in recent weeks, while new lending rates also adjusted downward in line with the expectations of the Central Bank.

“Further space remains for market lending rates to decline, particularly with the high level of excess liquidity in the money market, which is deposited with the Central Bank at the SDFR of 4.50 per cent at present,” the Central Bank said.

The monetary authority also noted that following the contractions recorded in the preceding three months, credit disbursed to the private sector expanded notably in August 2020, reflecting the impact of low lending rates as well as concessional credit schemes.

“The expansion of credit to the private sector is expected to continue in the period ahead, despite the recent rise in COVID-19 infections, which is expected to be short-lived,” it added.

Meanwhile, the Monetary Board also decided to maintain the Bank Rate at 8.5 percent and Statutory Reserve Ratio (SRR) at 8.5 percent.