The Monetary Policy Board of the Central Bank of Sri Lanka held the Overnight Policy Rate (OPR) at 8.75% in its September review, judging that the effects of proactive tightening in May and other measures had largely materialised while noting inflation and geopolitical and climate-related risks. The OPR had been held at 7.75% from November through March before a 100-basis-point increase to the current level in May and another hold in July. Headline inflation rose to 8.0% year on year in August and is projected to remain in high single digits through the first quarter of 2027 before easing toward the 5% target, while medium-term expectations remain broadly anchored. Real growth reached 4.7% year on year in the first half, and private-sector credit growth is gradually moderating but is expected to remain sufficient to support activity. The current account returned to surplus in August after four consecutive monthly deficits, while gross official reserves rose to USD 6.9 billion on net foreign-exchange purchases by the central bank. The outlook remains exposed to evolving Middle East tensions and potential El Niño conditions. The central bank said it will remain data-dependent and stands ready to act if inflationary pressures intensify or expectations show signs of de-anchoring.
Central Bank of Sri Lanka Holds Overnight Policy Rate at 8.75%
The Central Bank of Sri Lanka held the Overnight Policy Rate at 8.75%, judging that the effects of its May tightening and other measures had largely materialised. Headline inflation reached 8.0% in August and is expected to remain in high single digits through the first quarter of 2027 before easing toward the 5% target, with the central bank remaining data-dependent amid geopolitical and climate-related risks.