The Monetary Policy Board of the Central Bank of Sri Lanka decided to reduce the Standing Overnight Policy Rate (OPR) by 25 basis points to 7.75% at its meeting held yesterday, further easing the monetary policy stance.
This decision was reached after a careful assessment of both domestic and global economic developments. The Board believes that this measured easing will help guide inflation towards the target of 5%, amid prevailing global uncertainties and subdued inflationary pressures. As anticipated, deflationary conditions that prevailed since March 2025 have now begun to ease.
Recent projections indicate that the anticipated increase in inflation will be more gradual than previously expected. Inflation is projected to turn positive in the early third quarter of 2025 and align with the target over time. Core inflation is also expected to rise gradually from its current low levels in the coming months.
Inflation expectations continue to align with the Central Bank’s target. Leading economic indicators point to sustained progress in domestic economic activity. However, global uncertainties have intensified since the last policy review and could have implications for Sri Lanka’s economic outlook.
Market interest rates have broadly stabilised at lower levels. With the latest policy easing, the Board anticipates further downward adjustments in lending rates. Credit flows to the private sector remain strong, with key sectors of the economy benefiting from this expansion. This trend is expected to continue throughout the year, bolstered by the current policy stance.
Sri Lanka’s external sector performance has remained robust so far this year, supported by inflows from tourism earnings and workers’ remittances, despite a widening trade deficit. Net foreign exchange purchases by the Central Bank have helped strengthen official reserves, even amidst ongoing debt servicing and other forex outflows. However, the Sri Lankan rupee has experienced some depreciation against the US dollar during the year, following two consecutive years of appreciation against major currencies.
Looking ahead, the Board will continue to closely monitor both domestic and global economic developments and will take appropriate action to ensure inflation stabilises around the 5% target, while supporting the economy to achieve its full potential.
The next regular monetary policy announcement is scheduled for 23 July 2025.
Source: Central Bank of Sri Lanka (CBSL)
