By Uditha Jayasinghe
COLOMBO (Reuters) – Sri Lanka’s central bank is expected hold policy rates unchanged for a third consecutive meeting on Thursday in its bid to boost economic growth and help mitigate the fallout from potential U.S. tariffs, a Reuters poll showed.
The country grew at a better-than-predicted pace of 5% in 2024, a turning point after its economy tumbled into a deep financial crisis, exacerbated by a severe shortage of dollars, three years ago.
All twelve of the analysts and economists polled by Reuters unanimously expect the monetary authority will maintain its policy stance amid benign inflation, stable growth, and uncertainty over simmering U.S. tariff tensions.
U.S. President Donald Trump’s administration imposed 44% tariffs on the island nation, which will affect about $3 billion of its exports and possibly undermine its economic recovery.
The U.S. subsequently suspended the tariffs for three months and officials from both sides are in talks to strengthen trade relations.
“Inflation is below expectation. But given the global uncertainty and pending conclusion on Trump’s tariffs, the central bank might wait before a rate cut,” said Udeeshan Jonas, strategy head at Colombo-based equity research firm CAL.
Sri Lanka reached a staff-level agreement with the International Monetary Fund (IMF) on a fourth review of a $2.9 billion program last month but needs to raise power prices before it can lock down executive board approval.
An increase in power prices will affect inflation, which was at minus 2% year-on-year in April but will remain well below CBSL’s target of 5%, analysts said.
Sri Lanka is on track to post growth of 3.5% this year, the World Bank said in its latest report, unchanged from its October forecast.
For detailed poll responses, please see below table:
Organisation Overnight policy rate
CAL Group 8%
Asia Securities 8%
Softlogic 8%
First Capital 8%
Asha Securities 8%
JB Securities 8%
Frontier Research 8%
HNB Stockbrokers 8%
Colombo University 8%
NDB Securities 8%
Advocata Institute 8%
Median 8%
(Reporting by Uditha Jayasinghe; Editing by Sharon Singleton)
