📈 Sri Lanka’s Central Bank Tightens Monetary Policy with 100bps Rate Increase

The Monetary Policy Board of the Central Bank of Sri Lanka has raised its Overnight Policy Rate (OPR) by 100 basis points to 8.75% to counter rising inflationary pressures and global economic uncertainties. • Policy Rate & Inflation: The OPR is increased to 8.75%. Headline inflation rose to 5.4% (YoY) in April 2026, driven primarily by domestic energy price hikes and strengthening demand conditions. Inflation is projected to remain above the 5% target in the short term before stabilizing. • Global & Domestic Drivers: Heightened tensions in the Middle East have kept global commodity prices, especially petroleum, elevated. This has forced sharp upward adjustments in domestic energy prices. • Economic Activity: Demand-side pressures are strengthening, characterized by continued credit expansion, credit-driven imports, and robust leading indicators of economic activity. Short-term inflation expectations have increased but remain well-anchored over the medium term.