The central bank said that inflation is projected to remain escalated in the near term on account of domestic supply shortages, increased global commodity prices, the effects of the large depreciation of the Sri Lanka rupee against the U.S. dollar thus far during the year, along with the impact of aggregate demand pressures.
However, this will change in the coming months and the bank expects that the recent tightening of monetary conditions and the strengthening of monetary policy communication will help anchor the inflation expectations of the public in the period ahead.
The central bank also said they expect to minimize excessive volatility in the domestic foreign exchange market through tightening of the monetary policy stance, restrictions on imports on open account terms, and the reduction in the proportion of mandatory foreign exchange sales by the banks to the central bank.
It also expects an increase in workers' remittances due to the notable reduction in the gap between the official exchange rate and the rate offered by the grey market and the continued increase in migration of workers, according to the central bank.
Sri Lanka's inflation, measured by the year-on-year change in the Colombo Consumer Price Index, increased to 29.8 percent in April from 18.7 percent in March, according to a report released by the central bank earlier.
Latest comments