The Central Bank of Sri Lanka (CBSL) said it is keeping the policy rate 14.50 percent, saying market rates have moved up fast, though officials have warned earlier that money will be printed to pay state worker salaries, undermining gains made through rate hikes.
Sri Lanka’s inflation hit 29.8 percent in April 2022 after two years of money printing and a collapse of the soft-peg to 380 to the US dollar from around 200 in March.
“The central bank said while inflation is projected to remain elevated in the near term, the last rate hike to 14.50 percent and other measures are “expected to contain any further build-up of inflation expectations and ease inflationary pressures in the period ahead.”
“Market interest rates have notably adjusted upwards reflecting the significant monetary policy tightening measures taken by the Central Bank in April 2022,” the central bank said.
“The interest rates on deposit and lending products of financial institutions have adjusted upwards considerably, correcting some anomalies that prevailed in the market interest rate structure.”