The Central Bank of Sri Lanka kept its benchmark interest rate unchanged at 7.75% at its January 2026 policy meeting, holding borrowing costs for the fourth consecutive time, stating that the current stance is sufficient to steer inflation toward the 5% target. Headline inflation stayed low at 2.1% in December, although food prices rose due to cyclone-related supply disruptions and seasonal demand. Inflation is projected to accelerate gradually and move toward the target by the 2nd half of 2026, while core inflation is expected to firm further. Economic momentum remains resilient, with GDP expanding 5.0% in the first nine months of 2025 and private-sector credit continuing to grow, supported by improving activity, vehicle imports, and post-cyclone rebuilding. Despite a wider trade deficit driven by higher imports, strong tourism receipts and workers’ remittances helped sustain a current account surplus and lift official reserves. The next policy review is scheduled for March 25, 2026.
