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Sri Lanka held its benchmark rate at a two-decade high to keep Asia’s fastest inflation in check while supporting economic recovery after the nation secured a $3 billion International Monetary Fund (IMF) bailout.
The Central Bank of Sri Lanka kept the standing lending facility rate unchanged at 16.5%, according to a statement on its website. Seven of eight economists in a Bloomberg survey expected a hold, while one predicted a 100-basis-point increase. The key rate is at the highest since August 2001.
“The maintenance of the prevailing tight monetary policy stance is necessary to ensure that monetary conditions remain sufficiently tight to facilitate the continuation of the ongoing disinflation process,†the central bank said in the statement.
The decision comes as price gains remained stubbornly high at about 50% in March, putting central bank Governor Nandalal Weerasinghe’s forecast for the gauge to cool to “mid-single digits†by year-end at risk. At its March meeting when the monetary authority unexpectedly raised the policy rate, CBSL and the IMF noted differences on the trajectory for price gains.
The IMF wants to see headline inflation to slow to the target band of 4%-6% by early 2025.