The Central Bank of Sri Lanka has increased the overnight policy interest rate by 100 basis points, bringing it to 8.75 percent following its latest Monetary Policy Board meeting held on the 25th. Officials state that the board reached this decision after carefully assessing both domestic and global economic conditions, along with potential future risks.
This decision was taken due to economic pressures in the country.
Earlier in March this year, the Central Bank maintained the overnight policy rate at 7.75 percent, choosing to keep monetary conditions stable at that time. However, increasing economic pressures in recent months forced policymakers to reassess their earlier position. The bank now emphasizes that its main priority is to control rising inflation while also ensuring overall financial stability and supporting sustainable economic growth in the country.
Inflation Pressures and Global Energy Impact.
Rising tensions in the Middle East have led to higher global oil prices, directly impacting economies worldwide, including Sri Lanka. As fuel and electricity costs increased, the cost of living in the country also rose significantly.
In response to higher energy prices, the government increased local fuel and electricity tariffs, which further raised household expenses. As a result, inflation climbed to 5.4 percent in April 2026 compared to the previous year. The Central Bank has identified this rise in inflation as a key reason for increasing interest rates.
