Colombo Consumer Price Index drops 0.3%

Sri Lanka’s Colombo Consumer Price Index fell 0.3% year-on-year in July, as food prices cooled, following a 0.6% decline in June, the statistics department reported.

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

Inflation in the food category slowed to 1.5% in July, down from 4.3% in June year-over-year. In the non-food category, consumer prices fell 1.2% this month, compared with a 2.8% decline year-over-year in June.

Sri Lanka, which was plunged into a financial crisis due to a record shortage of dollars three years ago, has made a strong recovery, 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 will most probably turn positive next month,” said Dimantha Mathew, head of research at First Capital.
“The rise of inflation will be slower into the third and fourth quarters,” Mathew added.

Sri Lanka’s central bank expects inflation to turn positive this quarter, marking the end of nearly a year of deflation.

It kept policy rates unchanged last week after trimming its benchmark interest rate by 25 basis points in May in a surprise move to support growth.