The Central Bank of Sri Lanka kept its Overnight Policy Rate unchanged at 8.75% at its July 2026 meeting, citing elevated inflation and increased global uncertainty. Headline inflation accelerated to 6.8% in June from 5.4% in May, largely due to higher domestic energy and food prices, and is expected to remain above the bank’s 5% target in the near term before gradually easing. The bank noted that core inflation is also likely to rise, although inflation expectations remain anchored around the target over the medium term.
Policymakers anticipate that tighter monetary policy, together with other government measures, will help moderate credit growth and ease demand pressures. On the external front, gross official reserves stood at USD 6.45 billion at the end of June, while the rupee has stabilized in recent weeks. Workers’ remittances have remained resilient despite renewed tensions in the Middle East and higher fuel import costs, which continue to weigh on the external sector.
