Thursday Nov 27, 2025
Thursday Nov 27, 2025
Thursday, 27 November 2025 06:21 - - {{hitsCtrl.values.hits}}
The Central Bank of Sri Lanka (CBSL) yesterday delivering the sixth and final Monetary Policy Review for 2025 announced that rates would remain unchanged at 7.75%.
The decision to hold policy rates steady was made at a Monetary Board review on Tuesday, after assessing both domestic and global developments.
The Board is of the view that the current monetary policy stance will help steer inflation towards the target of 5% in the period ahead, while supporting growth.
“The decision is based on the progress seen so far this year and price stability and potential growth,” Dr. Weerasinghe said during the post-Monetary Policy Review meeting media briefing yesterday.
He said stability is the most important foundation for sustainable economic growth. “We expect the economy to grow by 4.5% this year,” he added.
He also said that further easing of rates is still possible as the country has now built sufficient buffers – monetary, reserves, and fiscal – if there are any global headwinds.
The CBSL Governor also explained that there is a lot of global uncertainty. However, Sri Lanka would not have a lot of impact as the country is not exposed to raise funds from the market. However, he said if the world economy slows down, it will have a negative impact on the external sector.
“Thus, building buffers are important to make any adjustments if need arises. Before the economic crisis, we did not have any buffers and today, we are in a better position,” he added.
As per the CBSL, headline inflation based on the Colombo Consumer Price Index (CCPI) continued to accelerate in October for the third consecutive month. Inflation is expected to rise more gradually than projected earlier and move towards the target by the second half of 2026. Core inflation is also expected to accelerate at a modest pace, as demand in the economy gradually strengthens. Medium-term inflation expectations remain well anchored around the inflation target.
“Inflation is expected to rise more gradually than previously forecast but should reach the CBSL’s 5% target by the second half of 2026,” Dr. Weerasinghe added.
Leading economic indicators suggest a continuation of the growth momentum.
Credit to the private sector has recorded a notable and broad-based expansion thus far in 2025, supported by the low-interest-rate environment.
Dr. Weerasinghe said the CBSL is monitoring the credit to GDP by the private sector. “Although it has expanded, it is still below average compared to 2016-2018 level. So, overall, we do not see any unnecessary growth or an economic overheating,” he added.
The Governor also said the fiscal performance has been much better historically, noting that fiscal stability is always a positive factor for overall economic stabilisation.
“This also reflects a recovery in economic activity as well as the realisation of pent-up demand for vehicle imports. This credit momentum is likely to continue in the period ahead,” the CBSL said.
Imports have risen in recent months, contributing to a widening trade deficit. However, strong inflows from tourism and workers’ remittances have cushioned the impact on the external current account.
Gross official reserves were maintained above $ 6 billion thus far in 2025, supported by net foreign exchange purchases by the CBSL.
The CBSL expects additional inflows in December 2025, including receipts from the multilateral organisations.
The recent depreciation pressure on the rupee has subsided with the improvement in foreign exchange liquidity.
“The CBSL will continue to monitor and assess incoming data on evolving domestic and global economic conditions and emerging risks. The Board remains prepared to implement appropriate policy measures to ensure that inflation stabilises around the target, while supporting the economy to reach its potential,” it added.
