The Central Bank of Sri Lanka left its overnight policy rate unchanged at 8.75% for a second straight meeting in September 2026, weighing rising inflationary pressures from the Iran war against the need to support the island nation’s economic recovery. The decision matched expectations and followed a 100-basis-point increase in May, which was intended to support the rupee and protect foreign-exchange reserves amid Middle East tensions. Inflation rose to 8% in August from 7.3% in July, reaching a three-year high as higher energy costs pushed fuel prices up about 35% since March. The central bank is targeting 5% inflation this year, but considers the latest pressures largely supply-driven, while demand-related inflation remains contained. An appreciating rupee, tighter liquidity and the May rate increase reduced the need for additional tightening. Sri Lanka is also negotiating the seventh review of its $2.9 billion IMF program, which could unlock about $330 million in November after the national budget. The IMF expects the economy to grow 3% this year.