Sri Lanka inflation rises to 2.4% on year in June

SRI Lanka’s consumer price inflation rose to 2.4 per cent year on year in June from 1.6 per cent in May, official data showed on Monday (Jul 22).

Food prices rose to an annual 1.9 per cent in June from 0.5 per cent in May, the Department of Census and Statistics said.

Prices for non-food items also rose 2.7 per cent last month from 2.4 per cent in May as demand remained muted.

The National Consumer Price Index captures broad retail price inflation and is released with a lag of 21 days every month.

Inflation is unlikely to increase significantly in the next three months, analysts said, after Sri Lanka cut power tariffs by 22.5 per cent last week and reduced fuel prices.

The two policy measures were taken to align with a US$2.9 billion International Monetary Fund (IMF) bailout that has helped the island nation rebuild its foreign exchange reserves, temper inflation and strengthen its currency after a severe financial crisis two years ago.

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Inflation will remain within the Central Bank of Sri Lanka’s target of 5 per cent, they added.

“The concern is core inflation, which is at about 3.9 per cent. Inflation has remained low because food inflation has been contained but we don’t see any demand side pressures emerging,” said Dimantha Mathew, head of research at First Capital Holdings.

Sri Lanka’s central bank is expected to hold interest rates for a second straight meeting on Wednesday as it attempts to maintain monetary stability ahead of an announcement on presidential elections expected later this month. REUTERS