Govt. and CBSL Renew Monetary Agreement to Target 5% Inflation 📈

The Government of Sri Lanka and the Central Bank of Sri Lanka (CBSL) have signed a new Monetary Policy Framework Agreement (MPFA) to maintain the national inflation target for the next three years. • Agreement Details: Signed on 1 October 2026 by President and Finance Minister Anura Kumara Dissanayake and CBSL Governor Dr. P. Nandalal Weerasinghe under the CBSL Act No. 16 of 2023. Published via Extraordinary Gazette No. 2508/28. • Core Target: Sets headline inflation at 5% quarterly with an accountability margin of ±2 percentage points (3% to 7% range), measured via average YoY changes in the Colombo Consumer Price Index (CCPI). • Target Continuity: Unchanged from the inaugural October 2023 agreement following a mandatory three-year review evaluating economic structure, empirical evidence, and international practices. • Current Economic Context: Headline CCPI inflation remained at 8.0% in September 2026 (matching August), staying above the 7.0% upper bound for a third straight month. Core inflation (excluding volatile food and energy) rose to 5.4% from 5.1%. • Economic Outlook: CBSL projects headline inflation to stay in high single digits through Q1 2027 before gradually easing toward the 5.0% mid-point target via data-driven policy decisions.