The Central Bank of Sri Lanka which last week decided to maintain the Standing Deposit Facility Rate (SDFR) and the Standing Lending Facility Rate (SLFR) of the Central Bank unchanged at 6.50 per cent and 8.00 per cent, respectively said that going forward, the growth of monetary aggregates is expected to decelerate gradually over the remainder of the year. According to the Monetary Authority, this was due to reflecting the impact of the upward movement in market interest rates, while the envisaged fiscal consolidation path is expected to support the moderation of monetary expansion.
“In the monetary sector, market interest rates have risen, reflecting the tightening monetary conditions and the transmission of policy actions of the Central Bank,” the Central Bank said releasing its Monetary Policy Review for March 2016.
Accordingly, the year-on-year growth in broad money (M2b), which responds to monetary policy actions with a time lag, remained high at 19.1 per cent in January 2016 in comparison to 17.8 per cent recorded at end 2015.
“Private sector credit growth was 25.7 per cent in January 2016 compared to 25.1 per cent in December 2015 and 27.0 per cent in November 2015. In absolute terms, private sector credit grew by Rs. 43.6 billion during January 2016,” the Central Bank said.