The Central Bank of Sri Lanka has decided to maintain its Overnight Policy Rate (OPR) at 7.75%, following a meeting of the Monetary Policy Board held yesterday. The decision comes amidst encouraging signs of domestic economic recovery and easing deflationary pressures.

The Board stated that the current policy stance is consistent with steering inflation toward its 5% target, while simultaneously fostering growth. Inflation is projected to return to positive territory within the current quarter and gradually rise towards the target. Core inflation is also expected to pick up over the coming months, in line with improving demand conditions in the economy.

Sri Lanka’s economy recorded a robust 4.8% growth in the first quarter of 2025, with leading indicators pointing to continued momentum. Easing monetary conditions and declining market interest rates have supported the recovery, alongside a healthy expansion in private sector credit across various sectors.

On the external front, the sector remains resilient despite a widening trade deficit. Tourism receipts and workers’ remittances have continued to rise, contributing to the maintenance of healthy gross official reserves. The Central Bank has sustained its reserve accumulation through regular net foreign exchange purchases. Additionally, the country received the fifth tranche of the IMF’s Extended Fund Facility earlier this month.

However, the Monetary Policy Board remains cautious in light of increasing global policy uncertainty triggered by shifting trade dynamics and ongoing geopolitical tensions. The Bank affirmed its readiness to act decisively to ensure inflation stabilises around the target and to support the economy’s growth trajectory.

The next policy review announcement is scheduled for 24 September 2025.