February national prices soften

• March, however could see a pop as fuel prices reverberate 

The national inflation print showed the prices rising by 1.6 percent in the 12 months through February 2026, decelerating from 2.4 percent in January.

The prices measured on a monthly basis showed the prices in February fell 0.9 percent, from a 0.4 percent increase in January.

The inflation measured by the National Consumer Price Index softened in February but the next inflation print for March could be hotter, as the sharply higher fuel prices are sending shockwaves through the economy, hurting both the household and business incomes.  

The national inflation print showed the prices rising by 1.6 percent in the 12 months through February 2026, decelerating from 2.4 percent in January.

Meanwhile, the prices measured on a monthly basis showed the prices in February fell 0.9 percent, from a 0.4 percent increase in January.

The lagging indicator makes little sense in gauging the price pressures in the economy at present. The first glimpse into how the prices in everything, from the essentials to discretionary, shot up in response to the thrice raised prices of fuel could be seen from the month end Colombo Consumer Price Index.

The April prices could further be higher, even if the global oil prices dip, as the sticker prices of every product has already risen by a lot in response to the higher transport cost.

The Monetary Policy Board is meeting today for the second time of the year to determine the Overnight Policy Rate, which is currently at 7.75 percent.

A likelihood of a rate hike up to 100 basis points was high until yesterday evening, after the government made a bumper hike to the fuel prices in the weekend.

However, the announcement by United States President Donald Trump last morning in the US time to pause any attacks in Iran for five days resulted in a sharp fall in the global oil prices.

As this paper went into print, the prices at the Brent international exchange fell by 7 percent to around US $ 104 a barrel, after initially dipping below US $ 100.

The direction of the global oil prices and thereby the local prices at the pump, determines the trajectory of inflation in the next few months and thereby the interest rates.

The higher oil prices at the pump would lower the demand for fuel and thereby ease inflation while higher rates would do the same thing, helping to lower the price pressures emanating from the higher fuel prices.

It is said the cure for higher inflation is higher inflation itself, as people cut down on their purchases when the prices remain higher and thereby bringing the prices down later.

However, it takes a toll on the economic activities and growth, potentially slowing the things down.