Sri Lanka CB expects ease of Middle East conflict in its inflation projection: Official 

ECONOMYNEXT – Sri Lanka’s Central Bank expects the current Middle East conflict to ease and it to help curtail its inflation to the targeted 5 percent level in the second quarter of next year, a top Central Bank official said.

The Central Bank has projected inflation to be in the high single digits through the first quarter of 2027 and then ease to 5 percent.

Inflation in September remained at a 37-month high of 8 percent and has been above the Central Bank’s upper target limit of 7 percent for the past three months.

“We expect with the ease of the Middle East conflict going forward, and also the base effect from the second quarter onwards will.. help to decelerate inflation,” L R C Pathberiya, the head of the Central Bank’s Economic Research Department told reporters in a media briefing on Wednesday.

“So we expect inflation to stabilize around 5% from Q2 onwards, and it will gradually move towards 5%.”

He said although inflation remains high, inflation expectations for medium term remain broadly anchored around the target of 5 percent.

Central Bank Governor Nandalal Weerasinghe, in an August interview with Bloomberg stated that if oil prices remain around $80 a barrel toward the end of this year Sri Lanka can manage inflation and expected it to come down to the target level of 5% “towards end of this year and early next year.”

However, Brent crude prices have already risen above US$100 per barrel.

“Our baseline incorporates external global oil price forecasts published by institutional analysts, including projections from institutions like JP  Morgan, alongside baseline projections from international agencies such as the IMF’s World Economic Outlook and global macroeconomic models,” Weerasinghe told reporters on Wednesday when asked about the Central Bank’s prediction of easing the Middle East conflict in its inflation projection.

“We feed these independent forecasts directly into our analytical models,” he said,

“Because no entity can forecast global oil price movements with absolute certainty, these assumptions are updated periodically.”

“We do not generate proprietary forecasts for world oil prices; rather, our outlook reflects prevailing independent global assessments.If those baseline external assumptions shift, our domestic projections will adjust accordingly.” (Colombo/October 03/2026)