Govt., and CBSL ink deal keeping 5% inflation target for three more years

Saturday, 3 October 2026 00:37 - - {{hitsCtrl.values.hits}}

President and Finance Minister

Anura Kumara Dissanayake

CBSL Governor

Dr. P. Nandalal Weerasinghe

The Central Bank of Sri Lanka (CBSL) yesterday said it has reached an official agreement with Government to continue to target quarterly headline inflation of 5%, with an accountability margin of plus or minus two percentage points, for the next three years.

The new Monetary Policy Framework Agreement (MPFA) was signed on 1 October by President and Finance Minister Anura Kumara Dissanayake and CBSL Governor Dr. P. Nandalal Weerasinghe, under Section 26 of the Central Bank of Sri Lanka Act, No. 16 of 2023. It was published in Extraordinary Gazette No. 2508/28 the same day.

Inflation will be measured as the average of the year-on-year changes in the monthly Colombo Consumer Price Index (CCPI) over each calendar quarter.

The target is carried over unchanged from the first MPFA, signed in October 2023. The Act requires the target to be reviewed every three years, or sooner in exceptional circumstances. The CBSL said its review weighed the country’s economic structure, historical and empirical evidence, the credibility of the framework, stakeholder views and international practice, and that the Finance Ministry accepted its recommendation.

The renewal comes as inflation runs well above the target. Headline CCPI inflation held at 8% in September, unchanged from August and above the 7% upper bound for a third consecutive month, while core inflation, which excludes volatile items such as food and energy, rose to 5.4% from 5.1%.

The CBSL has projected that headline inflation will remain in high single digits through the first quarter of 2027 before easing towards the target. It said it remains committed to achieving the target through forward-looking, data-driven policy

decisions.