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Investing.com -- The Central Bank of Sri Lanka has projected an increase in the country's headline inflation, expecting it to peak around 2 percentage points above the bank's target in the second quarter of 2026, according to a monetary policy report on Friday.
This prediction comes after the central bank took significant measures to combat inflation last year. Amid a sharp decrease in inflation, the bank had cut policy rates by 125 basis points, a move aimed at facilitating a strong recovery from a severe financial crisis that the island nation had been grappling with.
The bank's report mentioned that the headline inflation might rise above the target between the end of 2025 and the middle of 2026. However, it also noted that this deviation from the target is likely to be temporary.
The expected rise in inflation is attributed to several factors. The central bank pointed to an unfavorable base effect, a rapid increase in global food inflation, and demand pressures as the primary reasons for the projected inflation hike.
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