The Monetary Policy Board of the Central Bank of Sri Lanka (CBSL) has announced a significant easing of its monetary policy, setting the newly introduced Overnight Policy Rate (OPR) at 8.00%. This move marks a reduction of approximately 50 basis points from the current Average Weighted Call Money Rate (AWCMR), which remains the operational target under the Flexible Inflation Targeting (FIT) framework.
The decision, made during the Board’s meeting on 26 November 2024, follows an extensive review of both domestic and global economic conditions. The aim is to steer inflation toward the 5% target while supporting economic recovery and maximizing the country’s growth potential.
Key factors influencing this decision include the sharper-than-anticipated deflation in the short term, a continued easing of inflationary pressures, positive developments in Sri Lanka’s external economic position, and limited room for further reductions in market lending rates.
As of 27 November 2024, CBSL has transitioned from its dual policy rate system to a single policy rate mechanism. The OPR, now at 8.00%, will serve as the central tool for monetary policy implementation. Consequently, the Standing Deposit Facility Rate (SDFR) and the Standing Lending Facility Rate (SLFR) are no longer considered policy rates but are instead tied to the OPR with a margin of ±50 basis points. This adjustment sets SDFR at 7.50% and SLFR at 8.50%.
In an official statement issued through an Extraordinary Gazette on 26 November 2024, the CBSL Governor emphasized that the policy shift represents a strategic step toward simplifying the monetary framework, enhancing transparency, and ensuring the alignment of financial markets with the bank’s monetary goals.
This decisive policy action underscores the Central Bank’s commitment to fostering economic stability and growth while maintaining inflation within the target range.
