Accordingly the new Repurchase Rate will be 7.25 percent while the Reverse Repurchase Rate will be 9.00 percent, the Central Bank announced.
According to CBSL, the decision was taken to reduce the repo rate during its monetary policy review meeting on Thursday (19) taking advantage of the low inflation rate in the country to stimulate economic growth.
Explaining the economic conditions, the CBSL said inflationary pressures in the domestic economy remained low in the recent months and increase output in domestic agricultural produce have further improved the outlook for inflation.
The broad money (M2b), a key economic indicator used to forecast inflation, has decelerated in the recent months while macroeconomic conditions have remained stable, the CBSL said
For five consecutive months this year Sri Lanka's inflation decreased to reach 4.3 percent in July. The Central Bank reduced policy interest rates earlier in July due to the low inflation in the country.
The monetary authority expects the domestic credit conditions to continue to ease in line with its policy direction, to support the revival in economic activity currently underway.
"The Central Bank expects credit flows to the private sector to gather momentum during the remaining months of the year, alongside the anticipated pick-up in economic activity," a statement issued by the CBSL noted.
Citing economic growth and stability, the International Monetary Fund (IMF) last month approved a US$ 407.8 million disbursement to Sri Lanka as the third tranche of a US$ 2.6 billion Stand-By-Agreement approved in July 2009.
Overall economic conditions in Sri Lanka are improving and the economy is likely to show strong growth this year, the international lender said.
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