The Monetary Policy Board of the Central Bank of Sri Lanka has decided to maintain the Overnight Policy Rate (OPR) at 8.75%, following its latest monetary policy review. The decision reflects the Board’s assessment of evolving domestic economic conditions and growing uncertainties in the global economy, particularly arising from renewed tensions in the Middle East.
The Central Bank noted that escalating geopolitical tensions have driven up global commodity prices, especially petroleum, posing risks to global economic growth and creating potential spillover effects for Sri Lanka. These developments have contributed to higher import costs and increased pressure on the domestic economy.
Headline inflation accelerated to 6.8% year on year in June 2026, driven mainly by increases in domestic energy and food prices. While inflation is expected to remain above the Central Bank’s target in the near term, policymakers anticipate it will gradually return to the desired level over the medium term. Core inflation is also expected to remain broadly aligned with the inflation target, while inflation expectations continue to remain well anchored.
The Central Bank observed that domestic demand has strengthened, although previous monetary policy tightening, together with complementary Government measures, is expected to moderate credit growth and ease demand pressures in the months ahead.
On the external front, higher fuel import costs and slower tourism earnings have widened the current account deficit since April, although strong workers’ remittances have continued to support foreign exchange inflows. Gross Official Reserves stood at USD 6.45 billion at the end of June 2026 despite ongoing foreign debt servicing obligations, while the Sri Lankan rupee has shown signs of stabilisation.
The Monetary Policy Board reaffirmed that the Central Bank remains committed to closely monitoring both domestic and international developments and stands ready to take further policy action to maintain price stability while supporting sustainable economic growth.
