The Central Bank has released its first Monetary Policy Report for 2026 in line with the Central Bank of Sri Lanka Act No. 16 of 2023.
The biannual report provides forward-looking insights into the economy. It focuses on inflation trends, growth projections and potential risks. In addition, the report explains the rationale behind recent monetary policy decisions.
The Monetary Policy Board used the information contained in this report during its January 2026 policy review.
Inflation Outlook
After eleven months of deflation, inflation turned positive in August 2025. Since then, it has accelerated gradually.
The Central Bank projects inflation to move towards the 5 percent target by the second half of 2026. Meanwhile, core inflation is expected to increase steadily. It is likely to stabilise around the headline inflation target as domestic demand strengthens.
Monetary Policy Stance
The Central Bank has continued its accommodative monetary policy stance. This approach reflects subdued inflationary pressures in the economy.
Moreover, policymakers aim to support economic recovery while maintaining price stability. The report notes that stable inflation expectations remain a key priority.
Economic Growth and Risks
Leading economic indicators show continued resilience in economic activity. This trend persists despite the impact of Cyclone Ditwah.
However, the report warns that rising global uncertainties could affect performance. External headwinds, including financial market volatility and geopolitical risks, may weigh on growth prospects.
Overall, the Monetary Policy Report highlights steady progress in stabilising inflation while supporting economic momentum. At the same time, the Central Bank remains cautious about global risks that could influence future outcomes.
Last modified: February 15, 2026
