FX.co ★ Sri Lanka Keeps Policy Rate at 7.75%

The Central Bank of Sri Lanka maintained its benchmark interest rate at 7.75% during its policy meeting in January 2026, marking the fourth consecutive instance of holding borrowing costs steady. The bank emphasized that the current policy stance is adequate to guide inflation towards its 5% target. In December, headline inflation remained low at 2.1%, although food prices saw an uptick due to supply disruptions from a cyclone and seasonal demand. Inflation is anticipated to rise gradually, reaching the target by the latter half of 2026, with core inflation expected to strengthen further. The economy continues to demonstrate resilience, showcased by a GDP growth of 5.0% in the first nine months of 2025, alongside ongoing growth in private-sector credit, bolstered by increased activity, vehicle imports, and efforts to rebuild after the cyclone. Despite encountering a wider trade deficit due to elevated imports, robust tourism revenues and workers' remittances have supported a current account surplus and boosted official reserves. The subsequent policy review is slated for March 25, 2026.