Strong monetary policy frameworks and adequate policy buffers are key to helping economies deal with more frequent external shocks, Central Bank Governor Dr. P. Nandalal Weerasinghe has said.
Speaking at the Reserve Bank of India’s Samvad Conference on October 19, the Governor said central banks cannot stop global shocks from happening.
However, they can build policy systems that help protect economic stability when such shocks occur.
Policy Response Must Be Timely
Weerasinghe said central banks need to respond to external shocks with timely and well-calibrated policies.
He also highlighted the need for central banks and other policymakers to coordinate their responses.
According to the Governor, maintaining price stability and building long-term economic resilience also requires exchange rate flexibility and sound macroeconomic policies.
Clear communication is another key part of this approach. Central banks need to explain their policy actions clearly to help keep inflation expectations stable.
Policy Buffers Can Help Absorb Shocks
The Governor also pointed to the need for adequate policy buffers.
These buffers can give policymakers more room to respond when external conditions change.
Weerasinghe made the comments during a panel discussion titled “Managing Uncertainties in Challenging Times.”
He used the country’s recent economic experience to explain how central banks can improve their ability to deal with external shocks.
His message was that economic resilience does not depend only on responding after a shock occurs. It also depends on building credible policy frameworks before the next shock arrives.
The approach brings together monetary policy, exchange rate flexibility, clear communication, stable inflation expectations and policy buffers as part of a wider framework for protecting economic stability.
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Last modified: October 21, 2026
