The Central Bank released its second Monetary Policy Report for 2026 in keeping with the requirements of the Central Bank of Sri Lanka Act, No. 16 of 2023. The biannual Monetary Policy Report provides forward-looking insights about the economy, particularly inflation and economic growth outlook, and risks to projections. Through this Report, the Central Bank strives to improve its transparency and accountability by communicating the rationale behind its recent monetary policy decisions.

This Report is primarily based on the assessment considered by the Monetary Policy Board during the monetary policy review in July 2026.

Key highlights

• Headline inflation, which accelerated sharply from low levels, is projected to remain elevated in the near term before converging to the target of 5%.
• The Central Bank tightened monetary policy in May 2026 to contain inflationary pressures and mitigate any risk of de-anchoring inflation expectations.
• Private sector credit growth is expected to moderate in response to recent policy measures.
• External sector remains resilient amid spillovers from the Middle East war.
• Outlook for economic growth remains broadly stable, although geopolitical and weather-related uncertainties could pose risks.

The Monetary Policy Report, which is an online publication, is available on the official website of the Central Bank at https://www.cbsl.gov.lk/en/publications/economic-and-financial-reports/monetary-policy-reports