Inflation in the Colombo district dropped sharply in August, driven by a decline in both food and non-food prices, following government reductions in utility and fuel tariffs, which helped ease price pressures across supply chains.
The Colombo Consumer Price Index (CCPI), the most closely watched measure of consumer prices, decelerated to 0.5 percent in the 12 months to August 2024, down from 2.4 percent in July. On a monthly basis, prices continued their decline, falling by 1.8 percent in August, accelerating from a 0.5 percent drop between June and July. After peaking at nearly 70 percent in 2022, inflation in Sri Lanka has remained in single digits for over a year.
The Central Bank of Sri Lanka recently stated that it is confident of keeping inflation below 5.0 percent through the first quarter of next year, with a slight increase expected thereafter that should not threaten its medium-term target. With inflation expectations well-anchored and no extraordinary events threatening price stability, the Central Bank indicated a leaning toward monetary easing. However, a rate cut is unlikely before the September Presidential elections but could occur later in the year.
Food inflation slowed significantly to 0.8 percent in August, down from 1.5 percent in July, with monthly prices falling by 2.0 percent as declines in commodity prices outweighed any increases. Non-food prices also softened, decreasing to 0.4 percent in August from 2.8 percent in July, with a sharp 1.8 percent monthly decline, marking a six-month streak of falling prices, driven by easing costs in utilities, power, and energy.
Reductions in electricity and water tariffs, along with price adjustments to fuel and gas, contributed significantly to lower non-food prices. These decreases are expected to impact the prices of goods by reducing production and transportation costs, further lowering retail prices.
Core inflation, which excludes volatile items such as food, energy, and transport, recorded 3.6 percent in the 12 months to August, down from 4.4 percent in July, indicating that underlying price pressures continue to ease.
Source – dailymirror.lk
