The Central Bank of Sri Lanka announced that it will from today (27) implement a single policy interest rate mechanism, the Overnight Policy Rate (OPR), transitioning from the dual policy interest rate mechanism.
This is expected to result in more flexible targeting of inflation.
As announced in the Central Bank’s Annual Policy Statement in January 2024 and the subsequent announcement in September 2024 of the planned implementation of the single policy interest rate mechanism, the Monetary Policy Board of the Central Bank of Sri Lanka has decided to implement a single policy interest rate mechanism transitioning from its dual policy interest rate mechanism, with effect from today, 27 November 2024.
This marks another significant improvement in the Flexible Inflation Targeting (FIT) framework implemented by the Central Bank.
Accordingly, the Central Bank introduces the Overnight Policy Rate (OPR), as its primary monetary policy tool to signal and operationalize its monetary policy stance.
The OPR will be periodically reviewed and adjusted as needed by the Central Bank to indicate and communicate a change in its monetary policy stance.
This transition is expected to enhance the efficiency and effectiveness of monetary policy signalling and transmission to the financial markets and the broader economy.
