Srilanka, Jan. 30 -- In line with widespread expectations, the Central Bank kept its Overnight Policy Rate (OPR) - its new key policy rate - at 8.00 percent at its first policy meeting of the year.

This decision was made with confidence that inflation will return to the medium-term target of 5 percent by the third quarter of this year.

Speaking at the post-meeting media briefing, Central Bank Governor Dr. Nandalal Weerasinghe noted that the current stretch of deflation is predominantly due to repeated cuts in fuel prices and electricity tariffs, which are supply-side factors and cannot be addressed through monetary policy adjustments.

Monetary policy is better equipped to manage inflation caused by demand-side factors by either raisi...