CBSL keeps Policy Rate steady at 7.75% amid global uncertainty

The Central Bank of Sri Lanka (CBSL) has decided to maintain the Overnight Policy Rate (OPR) at 7.75%, citing the need to balance stable inflation with emerging global risks, particularly those stemming from escalating geopolitical tensions in the Middle East.

Governor of the CBSL Dr. Nandalal Weerasinghe said that the Monetary Policy Board of the CBSL reached the decision at its latest meeting after assessing both domestic and global economic developments. The Bank noted that rising global energy prices and potential trade disruptions linked to the ongoing conflict have introduced fresh uncertainties into the economic outlook. Despite these pressures, inflation remains subdued. Headline inflation stood at 1.6% year-on-year in February 2026, well below the Central Bank’s target of 5%. Policymakers indicated that this low inflation environment provides sufficient room to absorb the recent increase in domestic energy prices and their potential spillover effects. Inflation is now to reach the 5% target by the second quarter of 2026, earlier than previously projected and is expected to stabilize around that level thereafter.

On the growth front, Sri Lanka’s economy recorded a robust expansion of 5.0% in 2025, despite disruptions caused by Cyclone Ditwah late in the

 year. Early indicators for 2026 suggest a strong recovery following the cyclone’s impact. However, the Central Bank cautioned that prolonged global tensions could weigh on economic activity going forward.

Sri Lanka’s external sector performance remained strong during the first two months of 2026, supported by higher export earnings, increased worker remittances and a rebound in tourism. Gross Official Reserves rose to USD 7.3 billion by end-February, with the Central Bank actively purchasing foreign exchange from the market.

However, risks to the external outlook persist, particularly through potential impacts on energy costs, trade flows, tourism and remittances. The Sri Lankan rupee remained broadly stable in early 2026, although some depreciation pressure has emerged in line with regional currencies following recent global developments.

The Central Bank reaffirmed its readiness to take appropriate policy measures to ensure inflation remains anchored while supporting sustainable economic growth.

Source : Daily News