CBSL Signals Rate Hold at 8.75% as Inflation Peaks 📈

• Monetary Stance: Central Bank Governor P. Nandalal Weerasinghe announced no additional interest rate hikes are needed this year following May's unexpected 100 bps increase to 8.75%. Policy will remain steady provided inflation aligns with forecasts. • Inflation Outlook: Key inflation reached 7.3% YoY in July (a 3-year high), driven by global energy & fuel shocks from the Middle East conflict. Rates are expected to peak near 8% in November before returning to the 5% target in H1 next year. • Economic Growth: CBSL projects GDP growth of 4%-5% for 2026, while the IMF predicts 3% alongside releasing $695 Mn under its $2.9 Bn bailout program. The economy expanded 5% YoY in 2024 and 2025. • Reserves & External Sector: Gross foreign exchange reserves currently stand at ~$6.6 Bn, with a target to reach ~$8 Bn by year-end despite oil import cost pressures. Fuel prices rose over 35% to offset external shocks.