The Central Bank’s preferred gauge of inflation, the Colombo Consumer Price Index (CCPI), in the month of June rose by 6.1 percent from a year earlier, picking up from 6.0 percent in May, according to the data released by the country’s statistics office.
But the prices measured excluding the often volatile categories of foods and energy—the so called core prices—were up 5.1 percent, slowing from 5.2 percent a month ago.
Meanwhile on a month-on-month basis prices rose by 1.6 percent picking up from 0.9 percent while the core prices edged up by 0.2 percent slowing from 0.5 percent in May. The annual average inflation was 5.5 percent, slightly up from 5.4 percent in May.
The Central Bank in March raised interest rates by 50 basis points as a preemptive measure to contain inflation which topped 7 percent as the prices were under pressure from the supply side and demand side factors.
Since then, inflation has been easing due to tighter monetary conditions.
Outside of inflation, the labour market is tight with near full employment and the economy also slowed due to the combined effect of tighter monetary and fiscal policies and is set to slow further due to extreme weather conditions.
The Central Bank a fortnight ago said it is confident of inflation easing towards its desired mid-single digit levels of around 6.0 percent towards the end of this year before further easing to around 5.5 percent during the first quarter of next year.
However economists opine that there could be some upward swing in prices during the next few months from disruption to food supplies due to the recent flood. Meanwhile, the impact from the increase in public transport fares effective from July could also have some impact on the prices.
Sri Lanka is gradually moving towards a sustainable monetary and fiscal policy management based on inflation targeting and fiscal consolidation from a cycle that created high inflation through fiscal and monetary stimulus.