• 1. Central Bank Governor hints at potential easing of monetary policy
• 2. Decision hinges on economic data and post-election political landscape

The Central Bank of Sri Lanka (CBSL) sees scope to loosen monetary policy but any decision will depend on the economic outlook when policymakers meet late next month, Central Bank Governor Dr. Nandalal Weerasinghe said.

Speaking to Bloomberg in Washington, he said that while it’s too soon to commit to any decision ahead of the 26 November policy rate meeting, indicators pointed to conditions for potential interest rate cuts.

“It appears there is some space for us to relax further, but we will look at the latest information before the November policy meeting,” he said. “For timing, we have to wait and see the data points.”

Bloomberg Intelligence forecasts policy rates will remain below that level for the rest of this year.

“We have seen a deflation situation right now,” Weerasinghe said.

The monetary authority has slashed rates by 725 basis points since the easing cycle started in April 2023.

Weerasinghe said there will be “some delays” in completion of the next review under the programme due to parliamentary elections scheduled for 14 November. Those will force the government to push back the budgeting process until early 2025.

He added that the government aims to reach a staff level agreement this year on the review, but the executive board will take it up next year once the 2025 budget is in place.

“The government will stick to the IMF programme and its parameters. I don’t see a reason why we need to change the parameters,” Weerasinnghe said.