Sri Lanka central bank cuts rates by another 50 bps to support economy

MUMBAI (Reuters) - Sri Lanka's central bank cut its benchmark interest rates by a further 50 basis points on Wednesday, its third reduction since the coronavirus crisis struck there in March.

The board acted to help the economy weather the economic impact of the pandemic, and also took subdued inflationary pressures into account, the bank said in a statement.

The Central Bank of Sri Lanka cut its Standing Deposit Facility Rate (SDFR) and Standing Lending Facility Rate (SLFR) to 5.50% and 6.50%, respectively, taking its total reduction to 150 bps so far in 2020, it said.

The bank has now cut interest rates six times over the last year, starting with a reduction last May when Easter bomb attacks triggered a slump in investment and tourism.

"The Monetary Board noted, with disappointment, that market lending rates have not declined in line with the series of measures taken to ease monetary policy and monetary conditions thus far during the year," the CBSL said in the statement.

"Therefore, financial institutions are urged to reduce lending rates without further delay, failing which, the Central Bank will be compelled to take appropriate regulatory action to bring down market lending rates," it added.

(Reporting by Swati Bhat; Editing by Andrew Heavens)