January 01, Colombo (LNW): Sri Lanka’s inflationary pressures remained subdued in December 2024, as the country continued to experience deflation for the fourth consecutive month.
The year-on-year (Y-o-Y) change in the Colombo Consumer Price Index (CCPI) recorded a deflation rate of 1.7 per cent in December, a slight improvement from the 2.1 per cent deflation seen in November 2024.
The Central Bank of Sri Lanka’s latest data reveals a moderation in the non-food deflation rate, which decreased to 3.0 per cent in December, compared to 3.3 per cent in the previous month.
This suggests a gradual easing of downward pressures on non-food items, which have been significantly impacted by global and domestic factors.
Food inflation, on the other hand, showed a modest increase. In December 2024, food prices rose by 0.8 per cent year-on-year, slightly higher than the 0.6% recorded in November.
This uptick in food inflation, though marginal, reflects some resilience in food prices, which have fluctuated due to supply chain adjustments and seasonal variations.
On a monthly basis, the CCPI showed an increase of 1.19 per cent in December, largely driven by a 1.24 per cent rise in food prices. In contrast, non-food prices saw a small decrease of 0.06 per cent, reflecting a relatively stable environment for many goods and services outside of the food sector.
Core inflation, which excludes volatile food and energy prices, remained steady at 2.7 per cent on a year-on-year basis, indicating that underlying inflationary pressures in the economy have remained relatively stable.
This suggests that inflationary forces, while present, have not yet reached concerning levels in the broader economy.
Looking ahead, the Central Bank anticipates that Sri Lanka will continue to experience negative headline inflation for the coming months.
This is expected to be driven by the ongoing impact of substantial energy price reductions, alongside lower food prices and the base effect resulting from the significant price hikes earlier in 2024, triggered by changes in taxation policies.
However, the Central Bank expects inflation to gradually turn positive in the months ahead, with inflationary pressures aligning towards the target rate of 5 per cent over the medium term.
