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Late realisation and price the nation pays
Daily FT
|May 27, 2026
THE decision by Central Bank of Sri Lanka to increase the Overnight Policy Rate (OPR) by 100 basis points to 8.75% is a significant and rather forceful monetary tightening measure.
Monetary policy signals should convey clear and un-biased signals to future expectations
Such an increase generally reflects deep concern within the monetary authority regarding emerging inflationary pressures, exchange rate instability, excessive liquidity expansion, or deteriorating external sector conditions.
Several important observations arise from this development:
1. A delayed but strong corrective action
A 100 bps increase is not a routine adjustment. It usually indicates that the authorities believe previous monetary settings were excessively accommodative or that market conditions have deteriorated faster than anticipated. It may also suggest that earlier assurances regarding stability were overly optimistic.
2. Underlying concern about the rupee
Cette histoire est tirée de l'édition May 27, 2026 de Daily FT.
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