Sri Lanka has formally set a 5% quarterly headline-inflation target under a new Monetary Policy Framework Agreement between the Government and the Central Bank of Sri Lanka.
President and Minister of Finance, Planning and Economic Development Anura Kumara Dissanayake and Central Bank Governor Dr. P. Nandalal Weerasinghe signed the agreement on October 1.
It was published in Extraordinary Gazette No. 2508/28 dated October 1, 2026.
Under the framework, the Central Bank will aim to maintain the quarterly headline inflation rate at 5%.
The agreement also establishes an accountability margin of plus or minus 2 percentage points around the target.
Quarterly headline inflation is measured using the simple average of the year-on-year percentage changes in the monthly Colombo Consumer Price Index for the three months of the relevant calendar quarter.
The inflation target and associated parameters are subject to review once every three years, or earlier where exceptional circumstances warrant.
The previous Monetary Policy Framework Agreement was signed in October 2023, making 2026 the scheduled review.
The Central Bank says its review considered Sri Lanka's economic structure, historical and empirical evidence, monetary-policy considerations, credibility of the framework, stakeholder views and international experience.
The 5% figure is a monetary-policy target.
It does not mean Sri Lanka's current inflation rate is 5%.
The Central Bank's September 30 monetary-policy review said inflation remained above the target and was expected to move toward 5% over the medium term.
This development is therefore distinct from the September 30 decision to maintain the Overnight Policy Rate at 8.75%.
That decision concerned the current monetary-policy stance. The new agreement formally establishes the inflation-targeting framework for the next three-year review period.