Sri Lanka Keeps Policy Rate at 7.75%

The Central Bank of Sri Lanka kept its benchmark interest rate unchanged at 7.75% at its January 2026 policy meeting, holding borrowing costs for the fourth consecutive time, stating that the current stance is sufficient to steer inflation toward the 5% target. Headline inflation stayed low at 2.1% in December, although food prices rose due to cyclone-related supply disruptions and seasonal demand. Inflation is projected to accelerate gradually and move toward the target by the 2nd half of 2026, while core inflation is expected to firm further. Economic momentum remains resilient, with GDP expanding 5.0% in the first nine months of 2025 and private-sector credit continuing to grow, supported by improving activity, vehicle imports, and post-cyclone rebuilding. Despite a wider trade deficit driven by higher imports, strong tourism receipts and workers’ remittances helped sustain a current account surplus and lift official reserves. The next policy review is scheduled for March 25, 2026.

The Central Bank of Sri Lanka kept its benchmark interest rate unchanged at 7.75% at its November 2025 meeting, stating that the current stance remains appropriate for guiding inflation toward the 5% target. Headline inflation continued to accelerate in October and is expected to rise gradually before easing toward the target by the second half of 2026. Core inflation is also projected to increase modestly as demand strengthens, while medium-term expectations stay anchored. Economic indicators point to sustained growth momentum, supported by a broad-based expansion in private-sector credit amid a low-interest-rate environment and revived demand, including for vehicle imports. Imports have increased in recent months, widening the trade deficit, but robust tourism and workers’ remittances have helped cushion external pressures. The Central Bank reaffirmed its readiness to adjust policy if risks emerge.

The Central Bank of Sri Lanka kept its benchmark interest rate unchanged at 7.75% during its September 2025 meeting, aiming to steer inflation toward the 5% target while supporting economic growth. Headline inflation turned positive in August after eleven months of deflation and is projected to gradually rise toward target by mid-2026, with core inflation expected to stabilize around that level. The economy also expanded 4.8% in the first half of 2025, with momentum carrying into Q3, underpinned by broad-based private sector credit growth. On the external front, improved tourism and remittance inflows offset a wider trade deficit, helping reserves remain stable at USD 6.2 billion by end-August. Reflecting these gains, major rating agencies raised Sri Lanka’s sovereign ratings, underscoring improved credit standing. The next policy review is scheduled for November 26, 2025.