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Market lending rate falls to two-year low as economy readies to take off

22 April 2024 03:14 am - 10     - {{hitsCtrl.values.hits}}


  • Prime lending rate fell 22 basis points to 10.41%
  • Prime rate hits a peak level of 29.67 percent in November 2022

The often watched market lending rate, which guides the rest of the rates on loans to small businesses to mortgages to consumers, touched a two-year low last week continuing its descent.

The average prime lending rate or the rate at which the banks lend to their most creditworthy clients for a short term fell 22 basis points to 10.41 percent last week.

This was the lowest level from 9.85 percent on April 1, 2022 just before the Central Bank raised interest rates by a bumper 700 basis points to rein in the inflation at the time.

Both government securities yields and the market lending rates are on the descent during the last 10 months since the time Central Bank pivoted to cut rates for the first time in June last year.

The prime rate hit a peak level of 29.67 percent in November 2022 when the monetary policy was  crushingly tight.

The Treasury bill yields too fell last week across all three maturities to slightly above 10.0 percent, closely in line with where the policy rates are.

The Central Bank in late March cut their key policy rates by 50 basis points to 8.50 percent and 9.50 percent levels as inflation remained soft but they were less happy about the money flowing into the real economy.

Although private sector credit has picked up, the pace of growth has disappointed them as they had asked the banks to adjust their lending rates swiftly and sufficiently to reflect the monetary policy easing.

The current lending rates should support the economy to accelerate its recovery as people and firms borrow to consume, for growth and to invest.

Sri Lanka is in the cusp of a fresh credit cycle which could see a record amount of credit being disbursed by the banks in the coming months.

This could potentially improve the incomes of people and thereby at least partly restore the purchasing power they lost during the red-hot inflation cycle seen in 2022 and most of 2023.

  Comments - 10

  • Mahila Monday, 22 April 2024 08:12 AM

    “Prime lending rate fell 22 basis points to 10.41% Prime rate hits a peak level of 29.67 percent in November 2022” So, that proves that ‘OUR POINT MAN', ‘overlooking and controlling’ SL finance is indeed, knowledgeable and "KNOWS HIS ONIONS"!!!??? Market forces, supply, and demand – factors in determining, Peoples’ craving and desire for funds and limitations on availability of Funds has overcome all other factors and REALISED AN EQUILIBRIUM, TO SHOWER THE ‘Pearl of the Indian Ocean’, probably with ‘MILK AND HONEY’ IN THE NEAR FUTURE!!?? May be, it would take another “COUPLE OF YEARS” to achieve OPTIMUM RESULTS and MAXIMUM IMPACT on the PURSE of THE POOR PUNCHISINGHO – THE MAN of the TOWN,CITY and VILLAGE!!?? Our sincere and grateful thanks go to Nandalal W, Mahinda S, Monetary Board of CBSL and importantly the Minister of Finance since 08/2022, President RW!!!???

    Arnold Monday, 22 April 2024 08:25 AM

    Long term out look is bleak. Investor confidence in Sri Lanka is long gone. Tourists who come are bargain hunters, and they are loyal to the destination only when it is the cheapest.

    SCranjithA Monday, 22 April 2024 01:24 PM

    When will you ever learn to have positive thoughts about our motherland minus your tinted-glasses.??

    Sokrates Monday, 22 April 2024 09:15 AM

    Not enough when you can borrow money at half the interest rate in other countries. This lending rate also clearly shows that Sri Lanka is still bankrupt and the alleged economic recovery is a fake. This continues to make Sri Lanka unattractive to foreign investors as many countries provide a better environment for investments.

    Raven Monday, 22 April 2024 09:47 AM

    Ranil's miracle in motion.

    Don Monday, 22 April 2024 01:16 PM

    when are they restoring pensioner deposit rate even the senior citizen gets max 8.75%. Real Rip off.

    jude Monday, 22 April 2024 06:47 PM

    When prices of goods are still high, CB governor must learned economics from YouTube to cut interest rates. Savings oriented SL economy don't respond like western economies for rate cuts. Only thing that will happen is more inflation. I doubt CB governor goes to a store to buy anything. Instead relies on window dressed CB metrics to decide on these rate cuts

    Kevin Tuesday, 23 April 2024 03:23 AM

    This is a sign of long term recession because there's no demand for loans.

    Mahila Tuesday, 23 April 2024 06:29 AM

    "SAVINGS ORIENTED SL ECONOMY DOESN’T RESPOND LIKE WESTERN ECONOMIES FOR RATE CUTS." Strange as it may seem, trust your instincts indeed!!??? BS!!?? However, ‘Time tested methodology’ is best!! Oh, they are partial and REACT only to Rate RISES!!!??? What a Load of Bull!!!?? How clever!!??? Honoris Causa degree, in Macroeconomics is awaiting AWARD, from any SL university of YOUR CHOICE!!!??

    Hell de Zairo Tuesday, 23 April 2024 12:24 PM

    Take off to where? Hell I presume

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