Sri Lanka cenbank cuts rate by 25 bps in surprise move to foster growth

COLOMBO: Sri Lanka’s central bank reduced the policy rate by 25 basis points in a surprise move on Thursday to foster stronger economic growth following a lingering financial crisis and to buffer any fallout from potential U.S. tariffs.

The Central Bank of Sri Lanka (CBSL) changed the overnight policy rate to 7.75%, it said in a statement.

“The Board is of the view that this measured easing of monetary policy stance will support steering inflation towards the target of 5%, amidst global uncertainties and current subdued inflationary pressures,” the CBSL said.

Supported by a $2.9 billion programme from the International Monetary Fund (IMF), Sri Lanka has steadily recovered from a financial crisis caused by a severe shortfall of foreign exchange reserves three years ago.

Sri Lanka central bank holds rate to support economic recovery

The island nation turned around its economy to post a 5% growth in 2024 and the World Bank predicts it will grow by 3.5% this year.

All twelve analysts and economists polled by Reuters however had unanimously expected the monetary authority would maintain its policy stance.