Sri Lanka’s national consumer prices fell 0.2% in July from June, driven by lower food prices that outweighed rises in non-food costs such as electricity and fuel. This compares with a 0.6% increase in consumer prices in June.
On an annual basis, point-to-point inflation rose 0.7% in July from a year ago, up from 0.3% in June. Monthly food prices declined 1.4% in July after rising 0.8% in June, although annual food prices still increased 2.2%, down from 4.2% in June. The drop in food prices was mainly due to lower costs of vegetables, coconuts, fresh fish, green chilies, rice, salt, limes, eggs, and big onions.
Non-food prices rose 0.8% in July, up from 0.3% in June, reflecting the lingering impact of June’s electricity tariff hike and higher petrol and diesel prices at the start of the month. In addition, prices for house maintenance materials, rents, tuition fees, and personal grooming services such as haircuts and shaving also increased. On an annual basis, non-food prices fell 0.6% through July, after a 2.8% drop in June, reflecting the previous cuts to fuel and electricity prices.
Core inflation, which excludes volatile food, energy, and transport prices, rose 0.9% year-on-year in July, up from 0.6% in June.
The Central Bank expects inflation to gradually return to its medium-term target of 5.0% by mid-2026, potentially exceeding it slightly in the latter half of next year before stabilizing, assuming no major supply shocks. According to the Colombo Consumer Price Index, the Central Bank’s preferred measure, prices fell 0.3% year-on-year in July, marking a possible final negative inflation print in the current deflationary period that began in September last year.
