Sri Lanka's key inflation rate drops 0.5% month-on-month in July
The central bank cut interest rates by 25 basis points on July 24 to spur economic recovery
SRI Lanka’s key inflation rate fell 0.5 per cent month-on-month in July after a 0.8 per cent rise in June, the statistics department said on Wednesday (Jul 31).
The Colombo Consumer Price Index (CCPI), a leading indicator for broader national prices, tracks inflation in Colombo, Sri Lanka’s biggest city.
CCPI rose to 2.4 per cent year-on-year in July, after a 1.7 per cent rise in June.
“The inflation index has actually declined on a month-on-month basis. This is a change due to the base effect from last year,” said Raynal Wickremeratne, co-head of research at Softlogic Stockbrokers.
“Annual average inflation continues to reduce despite the slight monthly fluctuations, with the annual average inflation declining to 2.8 per cent in July compared with 3.1 per cent in June,” he added.
The South Asian country racked up record inflation that peaked at 70 per cent in September 2022 after its economy was pummelled by the worst financial crisis in decades.
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Its central bank cut interest rates by 25 basis points on July 24 in a surprise decision meant to spur economic recovery.
However, the rate cut is unlikely to propel growth beyond the projected 3 per cent, with markets likely to keep a close eye on Sri Lanka’s presidential election on Sept 21.
In its latest policy decision, the central bank said inflation could rise in the near term but would remain lower than the 5 per cent target.
Food prices rose 0.1 per cent month-on-month in July after a 2.8 per cent climb in June, the Department of Census and Statistics said.
Prices for non-food items fell 0.7 per cent month-on-month in July after dropping 0.1 per cent in June, with costs remaining subdued due to a 22.5 per cent reduction in power tariffs as well as lower fuel and cooking gas prices implemented earlier this month.
“Core inflation, which is about 4 per cent to 4.4 per cent might be a concern but that is likely to remain diluted because of lower food inflation and reduction in power prices,” said Dimantha Mathew, head of research at First Capital.
“At this point we don’t see inflation as a concern.” REUTERS
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