The government and the Central Bank of Sri Lanka have signed a new Monetary Policy Framework Agreement that keeps the national inflation target at 5% for the three years to October 2029.

Under the agreement, published in the Government Gazette on 1 October, the Central Bank must keep quarterly headline inflation, measured by the Colombo Consumer Price Index, within a band of 3% to 7%.

The Bank will be considered to have missed its target if inflation stays more than two percentage points away from 5% for two consecutive quarters, triggering formal reporting requirements.

Central Bank officials have defended the target as the most suitable option for the economy, and say they expect easing global energy pressures to help bring inflation back towards 5% in the second quarter of next year.