Colombo: Sri Lanka's Central Bank on Tuesday reduced the policy interest rates to accelerate growth.
The bank decided to reduce the Repurchase rate and the Reverse Repurchase rate of the Central Bank by 50 basis points each.
It now stood at 6.5 percent and 8.5 percent respectively with immediate effect, said a bank statement.
The bank said the decision was driven by the recent growth forecasts for advanced economies and emerging market economies which have raised concerns regarding the global economic recovery.
"The heightened uncertainty arising from the delay in announcing tapering of the quantitative easing (QE) by the US Federal Reserve, coupled with the current political impasse experienced by the United States resulting in a government shutdown and inability to increase the debt ceiling has also increased market volatility."
Similar moves to cut policy interest rates in December 2012 and May 2013 had reduced the borrowing costs providing encouragement to private sector investments.
"These policies have strengthened the macroeconomic environment which is likely to enable the economy to comfortably exceed a GDP growth rate of 7 per cent in 2013", the Central bank said.