The Monetary Board has arrived at the decision to hold rates after carefully considering current and expected developments in the domestic and global economy, with the aim of stabilizing inflation at mid-single digit levels in the medium term to support growth.

Accordingly, the Standing Deposit Facility Rate (SDFR) and Standing Lending Facility Rate (SLFR) remain at 7.25 percent and 8.50 percent, respectively, while the Statutory Reserve Ratio remains at 7.50 percent. According to the Central Bank, tight monetary policy conditions are observed globally with a continuous strengthening of the US dollar.

Sri Lanka's external sector recorded a mixed performance and the exchange rate depreciated at a faster pace while the deficit in the trade account continued to expand during the first seven months as import growth outpaced export growth. According to the provisional estimates of the Department of Census and Statistics (DCS), the Sri Lankan economy grew by 3.7 percent in the second quarter of 2018, while estimates for the first quarter of 2018 were revised upward from 3.2 percent to 3.5 percent.

"The competitive flexible exchange rate, low inflation environment and structural reforms that are currently being undertaken by the authorities to support exports and investment are expected to facilitate a stronger and sustained growth over the medium Term," the Bank said. The Inflation is expected to remain within 4-6 percent target range despite recent transitory price pressures.

"Based on current and expected macroeconomic developments and taking into consideration the measures taken to address the prevailing imbalances, particularly in the external sector, the Monetary Board of the Central Bank was of the view that the continuation of the current monetary policy stance is appropriate," the Central Bank said.