*Economic Update | Monetary Policy Announcement | 29 January 2025* * *The CBSL maintains policy interest rates in line with our expectations* The Monetary Policy Board of the CBSL, at its meeting held on 28th Jan-25, decided to maintain the Overnight Policy Rate (OPR) at 8.00%. * The decision to maintain policy rates is in line with our expectations, as FCR predicted an *80% probability for CBSL to maintain rates and 20% probability to reduce rates from their current levels* * The Board arrived at this decision after a careful analysis of the current and expected macroeconomic developments on the domestic and global fronts to ensure that inflation converges to the target of 5.00%. * The Board observed that the current period of deflation, has largely been an outcome of administratively determined energy price reductions. *This trend is expected to continue over the next few months before inflation begins adjusting* towards the targeted level in the second half of 2025. * ⁠Latest projections indicate that deflation will continue, mainly due to the more than anticipated downward adjustment in the electricity tariff announced in Jan-25. *Inflation is expected to turn positive from mid-2025.* *Find FCR Pre-policy Analysis Full Report-* https://firstcapital.lk/wp-content/uploads/2025/01/Pre-Policy-Analysis-Jan-2025.pdf *CBSL Monetary Policy Announcement-* https://www.cbsl.gov.lk/sites/default/files/cbslweb_documents/press/pr/press_20250129_Monetary_Policy_Review_No_1_2025_e_Ky4f5.pdf *First Capital Research*