The Central Bank of Sri Lanka (CBSL) has announced a further easing of its monetary policy, reducing the Overnight Policy Rate (OPR) by 25 basis points to 7.75%. The decision was made at the latest meeting of the Monetary Policy Board held yesterday.
The Board stated that the move is aimed at steering inflation towards the target of 5%, amidst subdued inflationary pressures and ongoing global uncertainties. The Standing Deposit Facility Rate (SDFR) and Standing Lending Facility Rate (SLFR), which are aligned with the OPR, were also reduced to 7.25% and 8.25%, respectively.
Deflationary conditions that persisted earlier in the year have begun to ease since March, as anticipated. Projections now indicate a gradual increase in inflation, expected to turn positive by early Q3 2025 and converge with the target rate thereafter. Core inflation and inflation expectations are also expected to align with this trajectory in the coming months.
CBSL noted that domestic economic activity continues to show signs of sustained recovery, although rising global uncertainties pose potential risks. Market interest rates have stabilised at lower levels, and the central bank anticipates that the latest policy easing will further reduce lending rates, supporting credit expansion to key sectors.
Credit to the private sector remains strong and is projected to grow further in 2025. Meanwhile, the external sector remains resilient, underpinned by robust inflows from tourism and worker remittances, despite an expanding trade deficit. The central bank has also continued its net foreign exchange purchases, helping to strengthen official reserves amid ongoing debt servicing.
The Sri Lankan rupee has experienced some depreciation against the US dollar this year, following two consecutive years of appreciation.
The CBSL emphasised that it will continue to monitor both domestic and global developments closely and will take appropriate measures to ensure inflation remains around the 5% target while facilitating economic growth.
The next monetary policy announcement is scheduled for 23 July 2025.
