Sri Lanka Holds Overnight Policy Rate at 7.75% Amidst the Middle East Tensions Fast-Tracking Inflation Target

COLOMBO (News 1st) - The Monetary Policy Board of the Central Bank of Sri Lanka has decided to maintain the Overnight Policy Rate (OPR) at the current level of 7.75%. 

The Board arrived at this decision after carefully considering evolving developments in the global fronts and domestic outlook with particular attention to uncertainties arising from the ongoing Middle East conflict. 

The Monetary Policy Board announced that the current low level of inflation, at 1.6% year-on-year in February 2026, relative to the target of 5%, provides sufficient space to accommodate the impact of higher energy prices and their spillovers on inflation. 

Given the latest data and prevailing uncertainties, inflation is now expected to reach the target of 5% in Q2-2026, earlier than previously anticipated.

Inflation is projected to remain around the target thereafter. 

The economy recorded a strong real growth of 5.0% in 2025, despite the disruptions caused by Cyclone Ditwah towards the end of the year. 

Economic indicators point to a strong post-Cyclone recovery during early 2026. 

However, spillovers from the ongoing conflict could weigh on domestic economic activity in the period ahead, should the conflict be prolonged.