This development falls under the newly enacted flexible inflation targeting law, which mandates the Central Bank to forge an agreement with the Government to sustain inflation at a predefined level.

“This aligns with the stipulations of the newly enacted Central Bank Act, which also aims to facilitate the economy in reaching its potential growth. The inflation target is 5% with a plus or minus 2%.

The variation would be assessed based on a quarterly average of two quarters,” the Central Bank Governor Dr.Nandalal Weerasinghe told journalists at the post-monetary policy review meeting last week. He said the official Gazette to this effect is set to be issued today.