Colombo, Sri Lanka – November 27, 2024 (LankaXpress) The Central Bank of Sri Lanka (CBSL) has taken a significant step to support economic growth and ensure price stability by introducing the Overnight Policy Rate (OPR) as its primary monetary policy tool. At its Monetary Policy Board meeting on November 26, 2024, the CBSL announced a further easing of its monetary policy stance, setting the OPR at 8.00%.
This move represents an effective reduction of approximately 50 basis points from the current Average Weighted Call Money Rate (AWCMR), which remains the operating target under the Flexible Inflation Targeting (FIT) framework. The decision follows a comprehensive evaluation of domestic and international economic developments, risks, and uncertainties.
The Monetary Policy Board noted that deeper-than-anticipated deflationary conditions, the moderation of inflationary pressures, and improved external sector performance justified the easing measures. The objective is to steer inflation towards the 5% target while supporting economic recovery and optimizing the country’s productive capacity.
Transition to a Single Policy Rate Mechanism
Effective November 27, 2024, the CBSL will replace its dual policy rate mechanism with the single OPR system. The OPR will serve as the central tool for signaling and implementing the CBSL’s monetary policy stance. Consequently, the Standing Deposit Facility Rate (SDFR) and the Standing Lending Facility Rate (SLFR) will no longer be considered policy interest rates.
This streamlined approach is expected to enhance the transparency and effectiveness of monetary policy, aligning with international best practices.
The decision underscores the CBSL’s commitment to fostering economic stability and growth by addressing inflation expectations and ensuring a conducive environment for lending and investment.
