The Central Bank of Sri Lanka (CBSL) has decided to maintain the Overnight Policy Rate (OPR) at its current level of 8.75%, following the latest meeting of the Monetary Policy Board.
The Board said the decision was taken after carefully considering evolving domestic and global economic conditions and the outlook, including the impact of the proactive monetary policy tightening undertaken in May 2026.
It also took into account uncertainty stemming from geopolitical tensions in the Middle East and potential economic risks associated with El Niño conditions.
Sri Lanka’s economy remained resilient during the first half of 2026, recording real year-on-year growth of 4.7%. Leading economic indicators point to continued momentum, although global and climate-related uncertainties could weigh on the outlook.
Meanwhile, growth in credit to the private sector has been gradually moderating in response to recent policy measures. However, the Central Bank expects credit flows to remain sufficient to support economic activity.
Headline inflation increased to 8.0% year-on-year in August 2026, largely reflecting the impact of the energy shock across several sectors of the economy. Inflation is projected to remain in the high single digits through the first quarter of 2027 before easing towards the Central Bank’s 5% target.
Core inflation has also increased due to spillovers from higher energy prices, although medium-term inflation expectations remain broadly anchored around the target.
The Central Bank said the external sector has remained resilient despite ongoing tensions in the Middle East. The current account is estimated to have recorded a surplus in August following four consecutive months of deficits, supported by moderated merchandise imports and improved earnings from tourism and workers’ remittances.
Gross Official Reserves increased to US$6.9 billion at the end of August 2026, supported by net foreign exchange purchases by the Central Bank. The reserve figure includes the swap facility from the People’s Bank of China.
The Sri Lankan rupee, which appreciated against the US dollar during July and August, recorded mixed movements in September.
CBSL also said the recent sovereign rating upgrade is expected to further strengthen market sentiment.
The Central Bank said it would continue to adopt a forward-looking and data-dependent approach to monetary policy. It added that timely and appropriate measures would be taken if inflationary pressures intensify or inflation expectations show signs of becoming de-anchored.
The next regular monetary policy review is scheduled to be released on November 20, 2026. (Newswire)
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