March 03, Colombo (LNW): In February 2025, consumer prices in the Colombo district continued their downward trend, primarily driven by a significant reduction in electricity tariffs during the third week of January.
This price adjustment, combined with a slight easing of food prices, such as rice, provided further relief to consumers who had been burdened by skyrocketing costs in previous years.
The Consumer Price Index (CPI), a key indicator of inflation, fell by 4.2 per cent in the year ending February 2025, a sharper decline compared to the 4.0 per cent drop seen in January.
This marks the sixth consecutive month of deflation, following the onset of this current phase of falling prices in September 2024. The steady decline in headline prices signals a period of relief for consumers, after experiencing more than a 70 per cent increase in the prices of everyday goods just a few years ago.
On a monthly basis, prices also dipped into negative territory, with a 0.2 per cent decrease observed in February. This decline was largely attributed to a substantial fall in non-food prices, stemming from the reduction in electricity costs.
This followed a 0.5 per cent increase in prices from December 2024 to January 2025, reflecting the volatility often seen in monthly price changes.
Food prices, on the other hand, showed a modest decrease on an annual basis, dropping by 0.2 per cent as certain staple foods, including rice, saw price reductions. The rising cost of rice had been a major concern in recent months, placing significant pressure on both the government and consumers.
However, other food items such as fresh fish, dried fish, potatoes, and large onions saw price reductions, providing some relief. In contrast, the prices of coconuts, fresh fruits, and vegetables surged in February, leading to a slight 0.3 per cent increase in food prices on a monthly basis, matching the rise seen in January.
Non-food prices experienced a sharp decline of 6.1 per cent in the year through February 2025, reflecting the impact of the electricity tariff cuts. On a month-to-month basis, non-food prices fell by 0.5 per cent, contributing significantly to the overall reduction in the CPI.
Core inflation, which excludes the often volatile categories of food, energy, and transport, rose by 0.7 per cent in the twelve months to February 2025. This represents a slowdown from the 1.2 per cent increase recorded in January, indicating that underlying price pressures remain subdued.
The Central Bank has forecast that the current phase of deflation will persist through the first quarter of 2025, with inflation expected to turn positive from the second quarter onwards.
The Bank anticipates inflation will stabilise around its medium-term target of 5 per cent in the latter half of the year. However, inflation is expected to briefly exceed this target by approximately 2 percentage points in the second quarter of 2026.
