Sri Lanka raised interest rates significantly to control inflation.

Sri Lanka's central bank raised its benchmark interest rate by 1 percentage point, marking the country's first tightening of monetary policy in three years. Due to the impact of rising energy prices driven by the Middle East situation, domestic inflation pressures have been steadily increasing, prompting policymakers to take this action to curb inflation. The Central Bank of Sri Lanka raised its overnight policy rate by 100 basis points to 8.75% on Tuesday. Among the 10 economists surveyed by the media, only one predicted this rate hike. The central bank stated that tightening monetary policy is necessary given the rising inflation expectations, spillover effects of rising energy prices, and increasing external economic pressures. With the support of loans from the International Monetary Fund, the Sri Lankan economy is gradually recovering from the most severe financial crisis in decades. However, the escalating conflict in the Middle East is leading to imported inflation and impacting the local currency. In April of this year, the country's inflation rate exceeded the central bank's target of 5%, and the Sri Lankan rupee is among the worst performing currencies in Asia.