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

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 per cent, 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 per cent, 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.

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

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

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