Sri Lanka reduces policy rates by 50 bps to boost growth

People walk past the main entrance of the Sri Lanka’s Central Bank in Colombo, Sri Lanka March 24, 2017. REUTERS/Dinuka Liyanawatte/File photo

COLOMBO —  Sri Lanka’s central bank lowered interest rates by 50 basis points in an unexpected move on Tuesday as it focused on boosting growth prospects to steer the island nation out of its worst financial crisis in decades.

The Central Bank of Sri Lanka (CBSL) reduced the Standing Deposit Facility Rate to 8.5 percent and the Standing Lending Facility Rate to 9.5 percent, it said in a statement.

The central bank has now slashed interest rates by a total 700 basis points since last year as Sri Lanka’s economy began a painful recovery from its worst financial crisis since independence from the British in 1948.

READ: Sri Lanka resumes rate cuts to boost growth as inflation cools

“The Board arrived at this decision following a comprehensive assessment of current and expected domestic and international economic developments, to maintain inflation at the targeted level of 5 percent over the medium term, while enabling the economy to reach its potential,” CBSL said.

The central bank had kept its policy rates unchanged in January to tame inflation after a 3-percent sales tax increase at the start of the year pushed up prices and boosted inflation to 5.9 percent in February.