The Central Bank of Sri Lanka raised policy rates to 9.25% forecast by end-2026 amid persistent inflation and external pressures.
The Central Bank of Sri Lanka increased policy rates by 100bps on 26 May to curb inflation, reduce credit-driven imports, and stabilize the LKR. The move targets rising domestic demand and inflationary risks from high oil prices and external pressures.
Headline inflation is expected to remain above the 5% target, prompting economists to forecast an additional 50bps hike in Q3-2026, with risks of another 50bps in Q4 if oil prices rise further. The end-2026 policy rate forecast was revised to 9.25% from 8.75%.
Risks to the outlook include geopolitical tensions in the Middle East and crude oil prices stabilizing below USD 90/bbl, which could lead to unchanged rates in 2026.