CBSL maintains policy rates; further acceleration of headline inflation expected

The Monetary Board of the Central Bank has 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 5.00 percent and 6.00 percent, respectively.

The Board noted the recent acceleration of inflation, driven mainly by supply disruptions and the surge in global commodity prices, and reiterated its commitment to maintaining inflation at the targeted levels over the medium term with appropriate measures, while supporting the economy to reach its potential in the period ahead.

“Supply side disruptions, removal of domestic price controls and upward adjustments to several administratively determined prices to reflect the rising global energy and other commodity prices along with the gradual firming of aggregate demand conditions, have pushed inflation above the targeted levels recently,” the Central Bank said.

“A further acceleration of headline inflation is possible in the immediate future, although such movements are expected to be transitory. The monetary policy measures already taken by the Central Bank will help curbing excessive demand pressures and preventing the buildup of adverse inflation expectations.”

Earnings from merchandise exports remained robust, recording over US dollars 1 billion for the fourth consecutive month in September 2021. Preliminary data show that merchandise exports have recorded an all time high in October 2021.

Expenditure on imports also increased, widening the trade deficit during the nine months ending September 2021 over the corresponding period of the previous year.

Credit extended to the private sector, which expanded notably underpinned by eased monetary conditions, has slowed somewhat in September 2021 while credit obtained by the public sector from the banking system, particularly net credit to the Government, continued to expand.

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