Rate hike likely, finds Reuters poll

The Central Bank of Sri Lanka (CBSL) is expected to raise rates for the second time this year on Friday, as a sharp surge in domestic inflation and a continuing foreign exchange crisis threaten to further derail the domestic economy.

Sri Lanka’s forex reserves dropped to US $ 2.36 billion as of end-January while the South Asian country’s debt obligations in the remainder of 2022 stand at almost double at US $ 4 billion.

The median estimate in a Reuters poll of 13 economists predicts the CBSL will raise the standing deposit facility rate and standing lending facility rate by 50 basis points each on Friday. Ten of the 13 who expect an increase in rates were equally split on the quantum of increase with five predicting a 50 bps while the other half 100 bps. The decision is due at 0200 GMT. The CBSL raised rates by 50 bps at its January meeting, surprising markets, as it sought to tackle inflation that is among the highest in Asia.