Tuesday, 19 January 2021 18:04

Central Bank continues its accommodative monetary policy stance

The Monetary Board of the Central Bank at its meeting held on 18 January 2021, decided to maintain the Standing Deposit Facility Rate (SDFR) and the Standing Lending Facility Rate (SLFR) of the Central Bank at their current levels of 4.50 per cent and 5.50 per cent, respectively, CB officials said.

The Board arrived at this decision after carefully considering the macroeconomic conditions and expected developments on the domestic and global fronts.

The Board, having noted the reduction in overall market lending rates during 2020, stressed the need for a continued downward adjustment in lending rates to boost economic growth in the absence of demand driven inflationary pressures, particularly considering the significant levels of excess liquidity prevailing in the domestic money market.

As announced in November 2020, the Board decided to introduce priority sector lending targets for the micro, small and medium scale enterprises (MSME) sector to support a broad based economic revival, in consultation with the banking community, CB stated.

Reflecting the impact of transmission of monetary easing measures, market interest rates continued to adjust downwards in 2020, and the low interest rate structure is expected to be maintained

The Central Bank relaxed its monetary policy stance to unprecedented levels in 2020 with a view to reviving the economy affected by the pandemic. In response, both market deposit and lending rates declined notably in 2020. Most market interest rates have declined to single digit levels, while some have reached their historic lows.


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