The Monetary Policy Board of the Central Bank of Sri Lanka (CBSL) has decided to cut the Overnight Policy Rate (OPR) by 25 basis points to 7.75%, further easing its monetary policy stance.
This decision, made at the Board’s meeting on May 21, comes after a thorough review of both domestic and global economic conditions, the CBSL said in a statement.
The Central Bank noted that the policy easing aims to steer inflation toward the 5% target amid global uncertainties and currently subdued inflationary pressures.
According to the CBSL, deflationary conditions that began to ease in March 2025 are aligning with projections, and inflation is expected to turn positive in early Q3 and gradually reach target levels.
Core inflation is also forecast to rise gradually from low current levels, with inflation expectations now more closely aligned with the Central Bank’s target.
Recent economic indicators show steady progress in domestic activity, though global uncertainties have increased since the last review.
The CBSL added that market interest rates have mostly stabilized at lower levels, and the latest rate cut is expected to drive further reductions in lending rates.
Private sector credit flows remain strong, benefiting key sectors, and this expansion is likely to continue with the support of the recent policy easing.
Sri Lanka’s external sector has shown resilience, bolstered by earnings from tourism and remittances, despite a growing trade deficit. Net forex purchases have helped strengthen official reserves.
While the rupee has depreciated slightly against the dollar this year after two years of gains, the CBSL said it will continue to assess data and take necessary action to ensure inflation stays on target while supporting economic growth.
