The Central Bank of Sri Lanka says that the country’s economy will gradually recover from the second half of 2023.
Releasing the ‘Money and Financial Sector Policies for 2023 and beyond’ report, Central Bank showed that It is expected that the growth rate of the economy will continue to be maintained from then on.
According to the report, inflation in the country continues to decline, and surface inflation is expected to decrease in the first half of 2023 and reach the desired level by the end of this year.
If there is any risk of rising inflation in the near future, it will be controlled through appropriate policy measures.
Inflation expectations remain well under control as expected inflation continues to trend downward.
Commenting on monetary policy and interest rates, the Central Bank states that the high market interest rates seen at present are expected to decrease in the near future.
As indicated by the short-term inflation outlook, market interest rates may decline in the future.
But until inflationary pressures are substantially contained, monetary conditions remain tight as needed.
Due to intense competition among financial institutions to raise deposits, market interest rates have risen above adjustments in policy interest rates.
The central bank has already asked banks and non-banking institutions to avoid such adverse competition.
With the improvement in money market liquidity, a decline in the market interest rate structure (deposit and loan interest rates) is expected in the near future.
But the central bank also says that if such a decline takes longer than expected, the central bank will consider taking appropriate regulatory measures.