By Uditha Jayasinghe
       COLOMBO, Aug 22 (Reuters) - Sri Lanka's central bank is
expected to further loosen monetary policy on Thursday, albeit
by a smaller degree than previously, as it looks to use the
rapid decline in inflation as an opportunity to foster growth
and put the economy firmly on a path of recovery.
    The median estimate in a Reuters poll of 15 economists and
analysts predicts a 100-basis-point cut in both the Standing
Deposit Facility Rate and the Standing Lending Facility rate,
taking them to 10% and 11%, respectively.
    The Central Bank of Sri Lanka (CBSL) has already reduced
rates by 450 bps in two moves over June and July.
    Sri Lanka's economy was crushed last year under the worst
financial crisis in over seven decades with inflation
sky-rocketing and foreign exchange reserves falling to record
lows, severely stunting the island nation's ability to import
essential commodities.
    CBSL responded by hiking rates by a total 1050 bps until
March to contain inflation and rebuild its dollar kitty.
    Having secured a $2.9 billion rescue package from the
International Monetary Fund (IMF) in March, the Sri Lankan
economy has gradually stabilised.
    Inflation measured in the key Colombo Consumer Price Index
eased to 6.3% in July from a high of 69% last September.
Inflation was at 12% in June.
    The steep reduction in inflation is creating space for
further easing, analysts said, although some predicted the apex
bank would wait and watch for the time being.   
    An additional rate cut on Thursday would help close the gap
between policy rates and interest rates of short-term government
securities, some analysts added.  
    "Despite earlier cuts there is a gap of about 300 basis
points, which needs to reduce for lending rates to come down,"
said Visaahan Arumainayagam, analyst for Colombo-based broking
firm Asha Securities.
    The decision will be announced via a statement at 7:30 a.m.
(0200 GMT) on Thursday.    
    A shift of focus to improving growth is needed after the
economy contracted 7.8% in 2022 and is projected to shrink 2%
this year, economists said. 
    An IMF team will arrive in Colombo in mid-September for the
first review of the IMF programme and Sri Lanka is also working
to wrap up debt restructuring talks by the end of next month.
    For individual contributions, please see table below:
    
 Organisation               Key Deposit Rate  Key Lending Rate
 Acuity                                  11%                12%
 Advocata Institute                      11%                12%
 CAL Group                               11%                12%
 HSBC                                    10%                11%
 First Capital                           11%                12%
 Asha Securites                          10%                11%
 Capital Economics                       10%                11%
 Standard Chartered                      11%                12%
 University of Colombo                   11%                12%
 S C Securities                          10%                11%
 Frontier Research                       10%                11%
 John Keells Stock Brokers            10.75%             11.75%
 Asia Securities                         10%                11%
 Almas Equities                           9%                10%
 JB Securities                           10%                11%
 Median                                  10%                11%
 
 (Polling by Uditha Jayasinghe, Anant Chandak and Susobhan
Sarkar; Editing by Swati Bhat and Raju Gopalakrishnan)