CB signals wary policy loosening
By Uditha Jayasinghe
The Central Bank yesterday (4 April) cut the policy ceiling rate by 25 basis points to 8.50%, signalling cautious relaxation of monetary policy for the first time in two years, predicated on falling inflation and growth.
The Central Bank, explaining its reasons, pointed out the change would moderate anomalous interest rates in April and allow the interest rates to stabilise in the short term, as well as reduce the gap between deposit and lending rates. The move was also prompted by unexpected low growth of 3.1% in 2017 and a positive turn in exports, higher foreign investment, current and primary account surpluses, as well as slowing inflation, which underscored stronger growth prospects for 2018.
“The Monetary Board felt it would be timely, at this juncture, ...