The Central Bank of Sri Lanka (CBSL) has announced significant changes to its monetary policy framework as part of its efforts to enhance economic stability and market efficiency.

At its Monetary Policy Board meeting held yesterday (26), the CBSL decided to maintain the policy interest rate at 8% while implementing a new single-policy interest rate mechanism, effective from today (27).

Under this revised framework, the Ove ight Policy Rate (OPR) will serve as the primary instrument for communicating and implementing the monetary policy stance. This marks a milestone in the Central Bank's flexible inflation targeting approach, aimed at ensuring price stability and economic growth.

The CBSL stated that the OPR will be reviewed and adjusted periodically, as necessary, to reflect shifts in its monetary policy stance. This mechanism is designed to improve the efficiency and effectiveness of monetary policy transmission, allowing economic stakeholders, including financial markets, to respond more effectively to policy changes.

The move is expected to bolster confidence in Sri Lanka’s financial system and support broader economic objectives by ensuring a more transparent and responsive monetary policy framework.