The Central Bank of Sri Lanka (CBSL) has published a report analyzing the deviation of headline inflation from the targets outlined in the Monetary Policy Framework Agreement (MPFA) for the second and third quarters of 2024.
The report, submitted to Parliament through the Minister of Finance, highlights significant shortfalls in inflation compared to the stipulated targets.
According to the report, headline inflation, measured by the Colombo Consumer Price Index (CCPI), fell below the target range for two consecutive quarters.
In Q2 2024, inflation stood at 1.4%, while in Q3 2024, it declined further to 0.8%.
These figures prompted the CBSL to provide an explanation for the deviation.
The CBSL attributed the lower-than-expected inflation rates to reduced demand pressures, a decline in global commodity prices, and favorable weather conditions.
In response, the CBSL has outlined measures to address these deviations, aiming to bring inflation back within the target range in the coming quarters.
The report forecasts that quarterly headline inflation will gradually return to the target range by Q3 2025, driven by monetary easing and price normalization.
Core inflation is also expected to stabilize over the medium term.
This report complies with Section 26(5) of the Central Bank Act, which requires the CBSL to report significant deviations from inflation targets to Parliament and the public.
The full report is accessible on the CBSL website for public reference.
