Sri Lanka’s Central Bank retains current interest rates

Sri Lanka’s Central Bank left current interest rates unchanged on Wednesday after a meeting of its Monetary Policy Board.

An official statement said the Monetary Policy Board at its meeting on Tuesday decided to maintain the Overnight Policy Rate (OPR) at the current level of 7.75 per cent.

The Board arrived at this decision after carefully considering both domestic and global developments. The Board is of the view that the current monetary policy stance will help steer inflation towards the target of 5 per cent in the period ahead while supporting growth.

The movements in the Colombo Consumer Price Index (CCPI) reflected a further easing of deflationary conditions as anticipated. Inflation is projected to turn positive this quarter and steadily increase towards the target of 5 per cent thereafter. Core inflation will continue to gradually accelerate in the coming months, reflecting the steady recovery in the economy’s demand conditions. 

“The economy recorded a firm growth of 4.8 per cent in Q1-2025. Leading economic indicators suggest this growth momentum will continue in the near term. Monetary conditions continued to ease, supporting the rebound in domestic economic activity. Most market interest rates have declined further in response to the recent policy rate reduction. The expansion of credit to the private sector has remained robust and broad-based so far in 2025. This private sector credit expansion is expected to continue,” the statement said.

The external sector continued to be resilient amidst a widening trade deficit. Inflows from tourism earnings and workers’ remittances improved further. Gross official reserves were maintained at healthy levels amidst debt service payments. Reserve buildup efforts continue with regular net foreign exchange purchases by the Central Bank. The fifth tranche of the IMF-EFF was received in early July 2025. 

Globally, policy uncertainty has intensified due to the evolving trade landscape and recurring geopolitical conflicts. The Board will carefully monitor any realisation of the global uncertainties and assess incoming data on domestic developments. The Board is prepared to take appropriate policy measures to ensure that inflation stabilises around the target, while supporting the economy to reach its potential. 

The next regular statement on the monetary policy review will be on September 24.