The board believes the decision will support steering inflation towards the 5-per cent target amid global uncertainties and subdued inflationary pressures.
Deflationary conditions have begun to ease beginning March 2025, as predicted, a release from the central bank said. The latest projections show signs of a more gradual pick-up in inflation in the near term than previously anticipated.
Accordingly, inflation is expected to turn positive in the early third quarter this year and gradually align with the target thereafter.
Core inflation is also expected to increase gradually in the coming months from current low levels. Inflation expectations are also aligning with the inflation target the bank noted.
Recent leading economic indicators reflect sustained progress in domestic economic activity.
With the current policy easing, the board expects further downward adjustments in lending rates. Credit flows to the private sector remain strong, with key economic sectors benefitting from such expansion. This credit expansion is expected to continue throughout the year, with further support from the latest easing.
The external sector performance remains robust thus far during the year.
The Sri Lanka rupee recorded some depreciation against the US dollar so far during the year, following two years of annual appreciation against major currencies.
ALCHEMPro News Desk (DS)
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