Colombo consumer price index falls

Sri Lanka’s Colombo consumer price index was down 0.6% year-on-year in June after edging down 0.7% in May, the statistics department said.

The Colombo Consumer Price Index, a leading indicator for broader national prices, tracks inflation in Sri Lanka’s biggest city.

Inflation in the food category slowed to 4.3% in June year-on-year from 5.2% in the previous month. In the non-food category, the pace of price growth slowed to 2.8% this month, from 3.3% year-on-year in May.

“We want inflation to go up but not too drastically, and we expect it to reach 0.5% or above in August,” said Raynal Wickremeratne, co-head of research at Softlogic Stockbrokers.

Sri Lanka, which was plunged into a financial crisis by a record shortage of dollars three years ago, has recovered strongly, posting 5% economic growth last year.

The island nation’s inflation has slowed significantly over the past two years, supporting a gradual reduction in interest rates.

Inflation is expected to accelerate again towards the end of the year and track closer to the central bank’s target of 5%, the regulator said in a statement last month.

Taking advantage of low inflation, Sri Lanka’s central bank cut its policy rate by 25 basis points in a surprise move in May, aiming to foster stronger economic growth.