Sri Lankan central bank tackles ‘large and persistent’ liquidity deficit
Central bank adjusts policy to support banks, but weak economy and falling rupee limit options
The Central Bank of Sri Lanka has tightened one policy instrument and eased another, as it grapples with competing economic demands amid mounting political instability.
The central bank cut its statutory reserve ratio by 150 basis points on November 14, bringing it to 6%, as it deals with what it calls a “large and persistent” liquidity deficit. Limited liquidity in the banking sector has pushed market rates to the top of the central bank’s rate corridor, hampering the pass-through of policy.
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