Colombo Consumer Price Index up 6.8% year-on-year in June

Sri Lanka’s Colombo Consumer Price Index rose 6.8% year-on-year in ​June, after a 5.5% rise in May, the Statistics Department said.

The index, a leading indicator for broader national prices, tracks inflation in Sri Lanka’s capital.

Food inflation rose to 3.6% in June from 0.9% year-on-year in May, while the non-food ‌category rose ‌to 8.4% from 7.8% ​last month.

Sri ‌Lanka ⁠reduced ​diesel prices ⁠by 25 rupees and petrol prices by 20 rupees on Monday for the first cut in four months, amounting to about a 6% decrease after hiking fuel costs by about 35%.

The country imports all its ⁠fuel and had to introduce fuel rationing ‌and declare Wednesdays ‌public holidays to manage consumption ​from early March.

The ‌Central Bank of Sri Lanka (CBSL) raised its ‌policy rate by 100 basis points to 8.75% in May, its biggest hike in three years, to counter higher inflation and a depreciating currency.

“This ⁠could well be the peak. Assuming fuel prices continue to reduce, inflation may also come down to the 5% level over the next 3-4 months,” said Shehan Cooray, head of research at HNB Stockbrokers.

“But fuel prices may not come down as fast as they went up.”

CBSL has set an inflation target of 5% and ​will announce ​its next policy decision on July 22.