Food and non-food prices push Lanka’s national inflation to 4.3% in April

Sri Lanka’s national inflation which captures price movements across all provinces increased by 4.3 percent during the 12-months to April 2016, accelerating from 2.2 percent a month ago due to increases in prices of both food and non-food items, the Census and Statistics Department data showed.

This is in comparison to the 3.1 percent inflation in Sri Lanka’s capital city, Colombo for the same month which rose from 2.0 percent in March. Sri Lanka’s national inflation is measured by National Consumer Price Index (NCPI), which is a more price reflective measure of inflation across the country than the Colombo Consumer Price Index (CCPI).

NCPI has continuously been rising from January 2016. Prices of both food items and non-food items rose by 2.14 percent from a year ago. Meanwhile the food inflation spiked to 4.9 percent yearon- year (yoy) in April from 0.5 percent a month ago while the non-food inflation rose by 3.8 percent yoy from 3.5 percent in March.

Central Bank in its May monetary policy review raised concerns about the inflationary pressure in the immediate future due to both demand side pressures from tax increases and supply side constraints from the adverse weather conditions impacting the growing and supplying of staples. May is usually a month with limited food supply due to the harvest season coming to an end and the recent flooding could add more pressures on prices.

Central Bank’s key policy decisions however are decided based on the CCPI measured core-inflation – excluding energy and food prices - which is still at 4.5 percent in April but the monetary authority is worried of anything above 5.0 percent. The NCPI measured moving average inflation for April 2016 is 2.6 percent, rising from 2.4 percent in March.