By Swati Bhat
(Reuters) – The Central Bank of Sri Lanka (CBSL) kept its key rates steady on Thursday, as widely expected, as it awaits the impact of past hikes to trickle through the economy while a fall in global commodity prices is also expected to soothe domestic inflation.
The Standing Lending Facility rate stayed at 15.50% while the Standing Deposit Facility Rate remained at 14.50%.
Eleven out of 15 economists and analysts polled by Reuters had expected rates to remain unchanged.
The central bank has raised rates by a record 950 basis points so far this year to battle high inflation in Sri Lanka, which is wilting under a severe economic crisis.
A severe foreign exchange shortage has left the government struggling to pay for essential imports of fuel, fertilisers, food and medicine.
Inflation hit 60.8% year-on-year in July and food costs expanded by a searing 90.9%, according to latest government data.
“In arriving at this decision, the board considered the latest model-based projections, which point towards a larger than expected contraction in activity and a faster than expected easing of price pressures,” CBSL said in a statement.
The bank said the measures taken by it and the government so far would help contain aggregate demand pressures while an anticipated decline in global commodity prices would pass through to domestic prices.
“The impact of persisted supply side disruptions, primarily due to shortages of power and energy, and uncertainties associated with socio-political developments are expected to have caused significant adverse effects on economic growth in Q2 2022,” the CBSL said.
Tens of thousands of people protesting against the crisis forced the ouster of the president, Gotabaya Rajapaksa, in July and he was replaced by Ranil Wickremesinghe.
The central bank said growth was likely to remain subdued in the third quarter as well.
(Reporting by Swati Bhat; Editing by Muralikumar Anantharaman and Raju Gopalakrishnan)
