The Central Bank of Sri Lanka trimmed its key interest rates to stabilize inflation and boost the country's economic potential, especially after the Easter attacks in the country dented the economy.
The bank lowered its standing lending facility rate and standing deposit facility rate by 50 basis points each to 8.50% and 7.50%, respectively.
Although economic activity is returning to its normal level after the attacks, growth in 2019 may be lower than initially projected.
Headline inflation and core inflation accelerated during the year, in part owing to the delayed impact of a significant depreciation of the Sri Lankan rupee during 2018. The bank expects inflation to remain in the 4% to 6% range in 2019 and beyond, backed by "appropriate policy measures."
The bank slashed the statutory reserve ratio for banks in a bid to address liquidity deficit in the domestic money market.
Meanwhile, the receipt of the sixth tranche of International Monetary Fund aid in May is expected to boost investor sentiment, the central bank said.