CBSL to Present Inflation Deviation Report to Parliament 📈

The Central Bank of Sri Lanka (CBSL) is set to present a formal report to Parliament explaining the continued deviation of headline inflation from the official target. Under the Central Bank of Sri Lanka Act, No. 16 of 2023, the bank is legally mandated to report when inflation misses the target margin for two consecutive quarters. • Inflation Performance Current Status: Headline inflation (CCPI) stood at 2.1% in December 2025, remaining below the central target. Target Framework: The Monetary Policy Framework Agreement sets a target of 5% with a tolerance margin of ±2 percentage points (3% to 7% range). Deviation Period: Significant deflationary trends and low inflation were recorded throughout 2025, with quarterly averages such as -3.6% (Q1) and -1.1% (Q2) missing the lower bound. • Key Drivers of Deviation Energy & Transport: Major downward adjustments in electricity tariffs and fuel prices during 2025 were primary drivers of low inflation. Currency Appreciation: The strengthening of the Sri Lankan Rupee amplified downward pressure on imported goods. Supply Factors: While food inflation stabilized at 3.0% in late 2025, the impact of Cyclone Ditwah caused recent month-on-month price pressure. • Outlook & Accountability The report will outline remedial actions to steer inflation back to the 5% target by the second half of 2026. A legal review of the inflation target agreement with the Government is scheduled for 2026 to ensure it reflects current structural economic changes.