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Central Bank decides to reduce interest rates

Jul 10, 2010 4:23:05 AM - itnnews.lk

The Central Bank of Sri Lanka has suddenly decided to reduce the Bank’s interest rates with immediate effect. The decision was taken at the monetary policy review meeting.

In a statement, the Bank said the Repurchase rate and the Reverse Repurchase rate will be reduced by 25 basis points each with immediate effect. Accordingly, the new Repurchase rate and the Reverse Repurchase rate would be 7.25 percent and 9.50 percent, respectively.

The decision to reduce the interest rates is seen by the business community as a measure to counteract the effect of the loss of European Union’s GSP plus trade facility. The Bank says the reduction in policy rates is taken due to the low inflation in the country. The Central Bank said the monetary policy stance was gradually eased during 2009 due to the declining inflation and the slowdown in economic activity and the Bank has observed several favourable developments in response to the monetary policy measures taken. The inflation declined for the fourth consecutive month to 4.8 percent and the annual average inflation reached 3.9 percent in June this year.