Central Bank Governor Dr. Nandalal Weerasinghe declined to give any indication on the future direction of interest rates while addressing a public seminar at the Central Bank, keeping markets and businesses guessing ahead of the next monetary policy review.
Weerasinghe said the Central Bank was yet to fully assess prevailing and emerging economic conditions before considering its next course of monetary policy action, The Island reported.
The Central Bank has held the Overnight Policy Rate at 7.75% in recent reviews amid a gradual recovery in economic activity and improving private sector credit growth. However, inflationary pressures have shown signs of re-emerging in recent months, particularly following the 18% increase in electricity tariffs and higher utility-related costs, raising concerns over the future path of consumer prices.
Policymakers have continued to stress the need to ensure price stability while supporting the country’s fragile economic recovery under the IMF-backed reform programme. Independent analysts expect the Central Bank to maintain its current stance at the upcoming review, citing rising domestic cost pressures, lingering global uncertainties and external sector risks.
Analysts say the recent acceleration in inflation could prompt a more cautious approach before any rate cuts later this year. Weerasinghe used the same forum on Wednesday to set out the Central Bank’s response to the USD 2.5 million sovereign debt repayment fraud and to underline the resumption of GDP growth toward USD 109 billion following the 2022 contraction.
