Sri Lanka c. bank raises rates to 21-year high to contain inflation

7/7/2022 12:37

        The Central Bank of Sri Lanka (CBSL) raised its key rates by a full percentage point on Thursday to tackle record high domestic inflation and to contain any build-up of underlying demand, it said.
        
        The Standing Lending Facility rate was raised to 15.50% while the Standing Deposit Facility Rate rose to 14.50%, the highest in 21 years.
        
        Inflation touched a record 54.6% year-on-year in June while food inflation accelerated to 80.1%.
        
        CBSL said in a statement, "The Board was of the view that a further monetary policy tightening would be necessary to contain any build-up of adverse inflation expectations."
        
        The policy adjustment would help guide inflation expectations to be anchored around the targeted 4-6% level over the medium term and curtail any build-up of underlying demand pressures in the economy, it said.
        
        The island of 22 million people is wilting under a severe foreign exchange shortage that has it struggling to pay for essential imports of fuel, fertilisers, food and medicine.