Sri Lanka's consumer inflation drops to 4.6% in July after peaking at 73.7% in Sep 2022
The National Consumer Price Index (NCPI) captures broader retail price inflation and is released with a lag of 21 days every month. In June consumer inflation stood at 10.8%.
Ten months after Sri Lanka's consumer inflation rate reached a record high of 73.7% in September 2022, the country posted a 4.6% year-on-year consumer inflation rate in July, helped by falling food prices, the statistics department said on Monday.
The National Consumer Price Index (NCPI) captures broader retail price inflation and is released with a lag of 21 days every month. In June consumer inflation stood at 10.8%, reports Reuters.
Food prices fell 2.5% in July from a year earlier, after rising 2.5% in June year-on-year, the Department of Census and Statistics said in a statement.
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Prices for non-food items rose 10.9% in July after rising 18.3% year-on-year in June.
Since June, Sri Lanka's inflation has come down sharply from the runaway levels seen earlier, partly due to the statistical base effect, but also helped by a stronger rupee currency, which has lowered the costs of fuel, power and imported food.
Sri Lanka's $2.9-billion bailout secured from the International Monetary Fund (IMF) in March has topped up foreign reserves, which had dwindled to record lows in early 2022, plunging the island into its worst financial crisis in more than seven decades.
"Inflation is likely to remain under 5%, largely because of the high base effect. We are unlikely to see demand side pressures that could push up inflation in the next few months," said Udeeshan Jonas, chief strategist at equity research firm CAL.
Encouraged by inflation easing faster than expected, Sri Lanka's central bank cut policy rates by a combined 450 basis points in June and July this year, after raising them by a record 1,050 basis points between April 2022 and March this year.
Sri Lanka's NCPI rose to a record high of 73.7% in September 2022 from a year earlier when an acute dollar shortage, caused by economic mismanagement and the impact of the Covid-19 pandemic, left Sri Lanka struggling to pay for essential imports including food, fuel, fertiliser and medicine.
The same month, the South Asia country reached a preliminary deal with the International Monetary Fund for a loan of about $2.9 billion, contingent on it receiving financing assurances from official creditors and negotiations with private creditors.
