The Central Bank of Sri Lanka (CBSL) has stepped in with “small interventions” to counter excessive demand due to market speculation and smooth out sharp exchange rate fluctuations observed last week, Central Bank Governor Dr. Nandalal Weerasinghe said.
Speaking on recent market behavior at the Monetary Policy Review briefing today, the Governor noted that the interbank forex market had briefly decoupled from broader commercial bank rates.
The Central Bank this morning increased the Overnight Policy Rate (OPR) by 100 basis points to 8.75%, citing rising inflationary pressures, higher global oil prices linked to Middle East tensions, and growing demand in the domestic economy.
The Monetary Policy Board said the decision was taken after assessing evolving domestic and global economic conditions, noting that elevated global petroleum prices have led to sharp increases in domestic energy costs and pushed inflation to 5.4% year-on-year in April 2026.
“Exchange rate movements observed last week showed that there was excessive demand,” Dr. Weerasinghe said, explaining the market mismatch. “Between the interbank market rate and the commercial rate, it should have been in between, but it moved away,” he said.
To correct the divergence, the Central Bank initiated targeted measures, he said.
“We took certain actions to bring back the normal situation,” the Governor noted. “As a result, by Thursday evening, we had a meeting with the Treasury and discussed some measures to stabilize the interbank rate around the buying and selling rates of the commercial banks that settled the market.”
Following these regulatory interventions and collaborative discussions, trading conditions have visibly smoothed out, he said.
Dr. Weerasinghe expressed optimism regarding the overall availability of cash flowing through the financial system, pointing to improved underlying market health.
“Now there is a good amount of liquidity in the market, which is a good development,” he said. (Newswire)