FX.co ★ Sri Lanka Keeps Policy Rate at 7.75%

The Central Bank of Sri Lanka has decided to maintain its benchmark interest rate at 7.75% during the September 2025 meeting. This decision is part of its strategy to guide inflation toward a 5% target while continuing to support economic growth. After experiencing eleven months of deflation, headline inflation turned positive in August and is expected to gradually align with the target by mid-2026. Core inflation is anticipated to stabilize around this level as well. The economy demonstrated a 4.8% expansion in the first half of 2025, with growth trends extending into the third quarter, driven by broad-based growth in private sector credit. On the international front, increased tourism and remittance inflows have helped counterbalance a wider trade deficit, enabling reserves to remain stable at USD 6.2 billion as of the end of August. Reflecting these positive developments, major credit rating agencies have upgraded Sri Lanka’s sovereign ratings, highlighting an enhanced credit standing. The subsequent policy review is slated for November 26, 2025.