Central Bank of Sri Lanka Governor Dr. Nandalal Weerasinghe has told Reuters that the Central Bank currently sees no need for further interest rate increases this year, following its unexpected 100-basis-point rate hike in May.
Weerasinghe said the May increase was a “proactive” move, based on expectations that inflation could rise to around 7%, and added that current inflation remains broadly in line with those expectations.
Sri Lanka’s key inflation index rose to 7.3% in July, its highest rate of increase in three years, driven largely by rising energy prices. Some analysts expect inflation to reach around 8% in November.
The Governor said inflation is expected to peak around current levels before gradually easing towards the Central Bank’s 5% target next year.
He also stressed that maintaining low inflation is necessary for sustainable economic growth and expects Sri Lanka’s economy to grow by around 4%–5%.
Sri Lanka’s economy expanded by 5% in both 2024 and 2025, recovering from the severe economic crisis in 2022, when the economy contracted by 7.3%.
The International Monetary Fund (IMF) supported the Central Bank’s May rate increase and subsequently approved the release of US$695 million under Sri Lanka’s US$2.9 billion IMF programme. The IMF has forecast economic growth of around 3% for 2026.
Meanwhile, maintaining a steady accumulation of foreign exchange reserves remains a key priority for the Central Bank as higher fuel import costs continue to put pressure on Sri Lanka’s external finances.
