Sri Lanka holds rates as central bank tries to stabilise harsh economic conditions

Sri Lanka kept borrowing costs unchanged for a second straight meeting, as the central bank judged the current level of interest rates to be tight enough to nudge inflation down in an economy already in the grip of a recession.

The Central Bank of Sri Lanka held the standing lending facility rate unchanged at 15.5% on Thursday, a move predicted by four of five economists in a Bloomberg survey, with one expecting a 150 basis-point increase.

The decision comes as policy makers seek to limit the impact of a deepening economic downturn and crippling shortages, having already raised the key rate this year by 9.5 percentage points to rein in Asia’s fastest inflation. In tandem with fiscal policy tightening, the central bank sees current monetary measures helping prevent any build-up in demand pressures.

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