CB Governor assures single policy rate mechanism implementation this year

By Charumini de Silva

Central Bank Governor Dr.Nandalal Weerasingheon last Wednesday assured that the implementation of a single policy rate mechanism is expected within this year. 

Speaking at the post-Monetary Policy Review meeting media briefing, he addressed the technical work involved in this transition and indicated that significant progress has already been made.

“There is a lot of technical work to be considered on moving towards a single policy interest rate mechanism. We have already done a lot and are having internal consultations with the Monetary Board,” Dr. Weerasinghe said in response to a question. 

In January, during the unveiling of the ‘Annual Policy Statement 2024,’ the Governor announced the Central Bank’s plans to consider adopting a single policy rate mechanism within the year. The move to a single policy rate mechanism aims to streamline the Central Bank’s monetary policy framework, enhancing its effectiveness in controlling inflation and stabilising the economy.

At present, the Central Bank employs two interest rates — the Standing Deposit Facility Rate (SDFR) and the Standing Lending Facility Rate (SLFR). 

Dr.Weerasinghe reassured that further information on introducing the single policy rate would be forthcoming. 

“We will soon announce our plan after discussing with the market participants as well,” he added.