Sri Lanka central bank expected to hold rates as inflation ticks above target

Policymakers face a dilemma: keep borrowing costs high to anchor prices or ease to support a fragile recovery after the World Bank upgraded the nation's income status.

By Handelsavisen Newsroom · Automated 2026-07-20 12:04 UTC · 1 min read

Sri Lanka’s central bank is widely expected to leave its key policy interest rate unchanged on Wednesday, according to a Reuters poll of economists.

The decision reflects the monetary authority's cautious stance as it attempts to keep inflation firmly anchored near its 5% annual target.

7% in April, reversing a cooling trend that had offered hope for earlier easing.

The hold comes as price pressures show signs of stubbornness.

Sri Lanka’s annual inflation rate accelerated to 5.4% in May, up from 4.7% in April, reversing a cooling trend that had offered hope for earlier easing.

This uptick places the economy slightly above the central bank’s official inflation goal, complicating the case for a rate cut.

The policy dilemma is sharpened by the country’s broader economic trajectory.