The Monetary Policy Board of the Central Bank of Sri Lanka (CBSL) has actually chosen to reduce the Overnight Policy Rate (OPR) by 25 bps to 7.75% at its conference held on Wednesday (21 ), thereby easing monetary policy further.The Board reached this decision after carefully thinking about the advancements both locally and worldwide, the CBSL stated in a statement.The CBSL kept in mind that the Board is of the view that this determined easing of financial policy stance will support guiding inflation towards the target of 5%, in the middle of worldwide unpredictabilities and present suppressed inflationary pressures.Deflationary conditions have actually begun to alleviate given that March 2025, as anticipated, it added, highlighting that the latest projections show indications of a more gradual pickup in inflation in the near term than formerly anticipated.Accordingly, inflation is expected to turn favorable in early 3rd quarter of 2025 and slowly line up with the target afterwards.
Core inflation is likewise expected to increase gradually in the coming months from current low levels.
Inflation expectations are also lining up with the inflation target.
Current leading economic indications show continual progress in domestic financial activity, according to the CBSL.However, worldwide unpredictabilities, which could have ramifications on Sri Lanka, have actually intensified from the time of the previous monetary policy review.
Most market interest rates have stabilised at lower levels, the statement added.With the existing policy easing, the Board expects even more down changes in loaning rates.
Credit streams to the economic sector remain strong with crucial economic sectors taking advantage of such expansion.
This credit expansion is anticipated to continue throughout the year, with additional support from the most recent easing.Thus far during the year, the external sector efficiency stays robust.
This is supported by inflows in the kind of earnings from tourism and employees remittances, in spite of the widening of the trade deficit.
Continued net forex purchases by the Central Bank helped strengthen the main reserves amidst debt servicing and other forex outflows.
The Sri Lanka rupee tape-recorded some depreciation against the United States dollar so far throughout the year, following 2 years of yearly appreciation against major currencies, it added.The Board will carefully examine inbound information on the domestic and worldwide fronts and take measures, as suitable, to make sure that inflation stabilises around the target of 5%, while supporting the economy to reach its potential, the declaration stated.