CBSL Targets 5% Inflation In 2025

COLOMBO (News 1st); Dr. P. Nandalal Weerasinghe, Governor of the Central Bank of Sri Lanka, has announced the institution's strategic focus for the upcoming year.

With the restoration of normalcy and stability through the implementation of sound macroeconomic policies, including monetary policy, the Central Bank aims to stabilize inflation around the target of 5%, consistent with the Flexible Inflation Targeting (FIT) framework.

Dr. Weerasinghe emphasized that the Central Bank's primary objective is to ensure the economy remains on track towards achieving sustained growth over the medium term, thereby ensuring the prosperity of the nation. 

He noted that the deflationary environment resulting from one-off effects of supply-side price adjustments is expected to continue in early 2025, according to current projections.

However, inflation is projected to converge to the target during the latter half of the year as the effects of supply-side factors dissipate and accommodative conditions are created by relaxed monetary policy. During this period, the Central Bank will continue to submit comprehensive reports to Parliament, as required under the Central Bank of Sri Lanka Act (CBA), providing reasoning for missing the inflation target, despite it being on the downside. This is aimed at ensuring transparency and accountability of the Central Bank's actions.

Following the high inflation episode from late 2021 to early 2023, Dr. Weerasinghe believes that this temporary period of deflation will provide some respite to the general public by dampening the cost of living to some extent.