Central Bank says policy interest rates unchanged

The Central Bank’s Monetary Policy Board, at its meeting held on Tuesday, decided to maintain the Overnight Policy Rate (OPR) at the current level of 7.75 per cent.

The OPR is a signal to the market and yesterday’s decision means interest rates across commercial banks will remain unchanged.

The bank said in a media release that the Board arrived at this decision after carefully considering evolving developments and the outlook on the domestic front and global uncertainties. The Board was of the view that the current monetary policy stance will support steering inflation towards the target of 5 per cent.

Inflation measured by the Colombo Consumer Price Index (CCPI) remained unchanged at 2.1 per cent in December 2025. However, food prices edged higher in December compared to November. This was due to supply chain disruptions caused by Cyclone Ditwah and higher demand for food during the festive season. Inflation is projected to accelerate gradually and move towards the target of 5 per cent by the second half of 2026. Core inflation, which excludes price changes in volatile food, energy and transport from the CCPI basket, has also shown some acceleration in recent months.

Going forward, core inflation is expected to accelerate further as demand in the economy strengthens. Meanwhile, inflation expectations appear to be well anchored around the inflation target.  

The economy grew by 5 per cent during the first nine months of 2025. Despite the slowdown in economic activity following Cyclone Ditwah in late 2025, early indicators reflect greater resilience. Credit disbursed to the private sector by commercial banks and other financial institutions continued its notable expansion in late 2025. This reflects increased demand for credit amid improving economic activity and increased vehicle imports. Post-cyclone rebuilding is expected to sustain this momentum. 

The external current account is estimated to have recorded a sizeable surplus in 2025, despite the widening of the trade deficit. Foreign remittances remained healthy during 2025. Despite large debt service payments during the year, Gross Official Reserves were built up to US$6.8 billion by the end of 2025. This was mainly supported by the net foreign exchange purchases by the Central Bank and inflows from multilateral agencies. The Sri Lanka rupee depreciated by 5.6 per cent against the US dollar in 2025 and has remained broadly stable thus far during this year.