COLOMBO Sri Lanka's central bank caught markets off-guard by cutting its key rates by 250 basis points on Thursday as inflation slowed at a faster-than-expected pace and the price outlook turned more benign.

The Central Bank of Sri Lanka (CBSL) cut its standing deposit facility rate and standing lending facility rate to 13% and 14%, respectively, from 15.5% and 16.5% previously.

"The commencing of such monetary easing is expected to provide an impetus for the economy to rebound from the historic contraction of activity witnessed in 2022, while easing pressures in the financial markets."

(Reporting by Uditha Jayasinghe and Swati Bhat; Editing by Shri Navaratnam)