Sri Lanka central bank unexpectedly cuts rates by 250 bps on improving inflation outlook

People walk past the main entrance of the Sri Lanka’s Central Bank in Colombo, Sri Lanka. REUTERS/Dinuka Liyanawatte/File photo

COLOMBO  – Sri Lanka’s central bank caught markets off-guard by cutting its key rates by 250 basis points on Thursday as inflation slowed at a faster-than-expected pace and the price outlook turned more benign.

The Central Bank of Sri Lanka (CBSL) cut its standing deposit facility rate and standing lending facility rate to 13 percent and 14 percent, respectively, from 15.5 percent and 16.5 percent previously.

“The commencing of such monetary easing is expected to provide an impetus for the economy to rebound from the historic contraction of activity witnessed in 2022, while easing pressures in the financial markets.”