Sri Lanka’s inflation is expected to remain elevated at around 8% during the rest of this year and the early part of next year, but is projected to return to the Central Bank’s 5% target after the second quarter of 2027, Central Bank Governor Dr. Nandalal Weerasinghe said.

The Central Bank of Sri Lanka’s Monetary Policy Board has decided to maintain the Overnight Policy Rate (OPR) at 8.75%, citing evolving domestic and global economic conditions.

The Board said its decision took into account the effects of proactive monetary policy tightening introduced in May 2026, along with other measures that have already taken effect.

It also highlighted uncertainties arising from geopolitical tensions in the Middle East and potential risks associated with El Niño conditions.

Despite these challenges, domestic economic activity has remained resilient, with the economy recording real growth of 4.7% year-on-year during the first half of 2026. Leading economic indicators also point to continued economic momentum, although global and climate-related risks could affect the outlook.

Speaking at a media briefing today, Dr. Weerasinghe said inflation is expected to gradually ease towards the 5% target after the second quarter of 2027.

Authorities have already taken measures through monetary and fiscal policy tools to minimise the adverse effects of elevated inflation, he said.

Meanwhile, growth in private-sector credit has gradually moderated following recent policy measures. However, the Monetary Policy Board expects credit flows to remain adequate to support economic activity.

Dr. Weerasinghe added that if further uncertainties emerge, the Central Bank’s monetary policy and the government’s fiscal policy would be used as necessary to minimise their impact on the economy.