Deflation nearing end as Colombo prices in July slip 0.3% on lower food prices

In what is likely to be the final negative inflation print in this spell, the prices in the Colombo district declined 0.3 percent from the same period a year ago. 

This was much slower than the 0.6 percent decline seen through June 2025 and marked the 10th consecutive negative inflation print.

Meanwhile, monthly inflation too fell by 0.2 percent in July from a month ago, after rising 0.9 percent in June from a month earlier.

This was predominantly caused by the decline in the food prices, which was rising for a few months consecutively.

The food prices fell 2.5 percent in July from a month ago while the annual food prices rose by 1.5 percent in the 12 months through July, decelerating from the 4.3 percent increase seen through June 2025.

The decline in July food prices was possible from a variety of commodities, which came down in prices. The prices of rice, sea fish, coconuts and coconut oil, vegetables, salt and the likes came down in July from the levels in June.

Meanwhile, what rose in prices in July were the prices of chicken, dried fish, milk powder, fresh fruits, red onions and the likes.

The Central Bank last week left its Overnight Policy Rate unchanged at 7.75 percent, as it was convinced that the current stretch of deflation would come to an end sooner and the prices would start rising well under its 5.0 percent medium target through the year end.

It isn’t until 2026 that the prices would reach its target level, the officials said last week.

Meanwhile, the non-food prices fell by 1.2 percent in July from a year ago, from a 2.8 percent decline seen through June 2025. The prices measured on a monthly basis meanwhile rose by 1.0 percent in July, picking up from 0.4 percent in June.

What caused the non-food prices to rise in July was the upward price revisions to electricity tariffs and the fuel prices, in line with their cost reflective pricing formula.

Those who stay on rent also saw their house rent rising in July from a month ago while they also had to spend higher for dine-outs and recreation and cultural events, which they took part in their leisure.

Family doctor fees too rose in July.

Meanwhile, the so-called core prices, measured stripping out the often-volatile items such as food, energy and transport, rose by 1.6 percent in the 12 months to July 2025, accelerating slightly from the 1.5 percent increase through June.

The current stretch of deflation, which lasted for 10 months through July, provided the much-needed relief for the people who were battered by the run-away prices in 2022 and most of 2023.

This was also seen from the rising consumer spend when they shop for their essentials, discretionary goods and services and also the durables when parsing the interim results of the companies for the June quarter.