Inflation hits 5% in May after Easter carnage

• Core inflation up to 6.2% from 5.5 percent in April
• Food prices up 4.4% likely due to supply chain disruptions
• Non-food prices up due to upward revision in fuel prices 

Inflation in Colombo measured by the Colombo Consumer Price Index (CCPI) rose sharply in May amid significant increase in food prices and higher non-food prices stemming from a fuel price revision.

The headline inflation rose 5.0 percent in the 12 months to May from 4.5 percent in April, reaching the highest level recorded so far this year. 

The so-called core inflation, which leaves out the often volatile items such as food and energy, rose by 6.2 percent from 5.5 percent in April. 

The Central Bank last week cut its policy rates by 50 basis points to spur growth in the aftermath of Easter attacks.

The Monetary Board flagged accelerating inflation in its policy statement but attributed the development to the lagged effect of the sharp depreciation of the rupee in 2018.
The Central Bank is of the belief that the recent acceleration in inflation is short-lived and is likely to remain within the desired range of 4 to 6 percent during 2019 and beyond. 
Prices of main food items such as of vegetables rose the most in May perhaps due to supply chain disruptions that happened in the aftermath of the Easter bombings, which paralyzed economic activities across all sectors. 

Sea fish prices also rose in tandem along with vegetable prices in May. 

Further, milk powder prices also rose in May, according to Census and Statistics Department data. 

Meanwhile, the prices of eggs showed some sharp declines in May after holding above Rs.20 for many months. Fruit prices also eased in May. 

All in all, food prices rose by a significant 4.4 percent in May from April, although the increase is modest at 0.8 percent from the same month 
in 2018. 

Meanwhile, non-food inflation in May rose by 0.5 percent from April while the year-on-year growth was a sharp 6.8 percent. 

The increase in non-food prices mainly stemmed from the upward revision of the fuel price on May 10 in tandem with the global oil prices. 

Meanwhile, the prices of medical and pharmacy products, spend on restaurants and hotels and miscellaneous goods and services recorded notable increases in May from a month ago. 
It’s baffling as to how the prices of restaurants and hotels could go up in May, as almost all these players were offering significant discounts to lure customers.