Macroeconomic Forecast Sri Lanka

For the third straight month, headline consumer price inflation (CPI) in Sri Lanka spiked up, coming in at a strong 7.0% y-o-y rate in May. With monetary growth aggregates (i.e. private sector credit and broad money supply) still stubborn at elevated levels, we believe that the recent acceleration of CPI still has further to go, supporting our core view on interest rates, which is for a further 100 basis points (bps) of tightening from the Central Bank of Sri Lanka (CBSL). For this year, we have raised our end-year and average CPI forecast to 7.0% and 6.3% respectively.

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