Move aims to anchor inflation around 5% and support economic growth amid global uncertainties
Colombo, May 23 — The Central Bank of Sri Lanka (CBSL) has reduced its Overnight Policy Rate (OPR) by 25 basis points to 7.75%, continuing its monetary easing trajectory in a bid to steer inflation toward the medium-term target of 5%. The decision was taken at the Monetary Policy Board meeting held on Wednesday (21), the CBSL announced in an official statement.
The Board cited improving domestic economic activity and subdued inflationary pressures as key reasons for the rate cut, while acknowledging increased global uncertainties since the last policy review.
“This measured easing of the monetary policy stance is expected to aid in achieving the inflation target of 5%, while supporting overall macroeconomic stability,” the statement read.
The CBSL noted that deflationary conditions that emerged earlier in the year have started to moderate, in line with its expectations. Inflation is projected to turn positive by early Q3 2025 and gradually converge to the target range, while core inflation is also set to rise from current low levels. Moreover, inflation expectations are reported to be aligning with the Bank’s medium-term goals.
Despite global challenges, domestic indicators continue to reflect a steady recovery. The Central Bank highlighted that most market interest rates have stabilized at lower levels, and credit flows to the private sector remain strong—particularly in key economic sectors. The latest policy easing is expected to accelerate this momentum.
On the external front, the CBSL reported a strong performance, with consistent inflows from tourism and remittances helping offset a widening trade deficit. The Central Bank has continued net foreign exchange purchases, bolstering official reserves despite ongoing debt obligations and currency outflows. However, the Sri Lankan rupee has experienced some depreciation against the US dollar after two consecutive years of appreciation.
Going forward, the Monetary Policy Board emphasized that it will remain vigilant and responsive to both domestic and global economic signals to ensure inflation stabilizes near the 5% target and that growth continues sustainably.