Sri Lanka central bank raises rates to 21-year high to contain inflation

The Standing Lending Facility LKSLFR=ECI rate was raised to 15.50% while the Standing Deposit Facility Rate LKSDFR=ECI rose to 14.50%, the highest in 21 years.Inflation touched a record 54.6% year-on-year in June while food inflation accelerated to 80.1%. "The Board was of the view that a further monetary policy tightening would be necessary to contain any build-up of adverse inflation expectations," CBSL said in a statement.

The policy adjustment would help guide inflation expectations to be anchored around the targeted 4-6% level over the medium term and curtail any build-up of underlying demand pressures in the economy, it said.

The island of 22 million people is wilting under a severe foreign exchange shortage that has it struggling to pay for essential imports of fuel, fertilisers, food and medicine.