Inflation in the Colombo district decreased in September, following a significant slowdown in August, as both food and non-food prices declined due to increased supply conditions and reductions in fuel prices and water tariffs.
According to the Colombo Consumer Price Index (CCPI), the key inflation measure, prices fell by 0.5% in September 2024 compared to the same period last year, a notable shift from the 0.5% increase observed in August.
On a monthly basis, prices declined by 0.1% in September, a slowdown from the 1.8% drop recorded in August. The recent administrative price cuts have alleviated some of the price pressures that consumers faced, allowing for modest financial relief after three years of challenges.
Core inflation, which excludes the often-volatile food, energy, and transport categories, rose by 3.3% year-on-year in September 2024, down from a 3.6% increase in August. Food prices, when measured annually, decreased by 0.3%, a reversal from a 0.8% increase in the previous month, while monthly food prices fell by 0.6% after a 2.0% decline in August.
Improved supply conditions and lower energy prices contributed to reduced costs for various food items, including vegetables and chicken. Non-food prices declined by 0.5% compared to a 0.4% increase in August, with monthly non-food prices rising by only 0.1% in September 2024 after several months of declines. The continuous cuts in fuel prices and adjustments in water tariffs helped mitigate increases in other categories such as education and healthcare.
The Central Bank noted that short-term disinflation may occur primarily due to the downward revisions of administered prices, although inflation is expected to converge and possibly exceed the medium-term target of 5.0% in the latter half of next year.
The Central Bank is required to report to the new Parliament via the Finance Ministry following the November elections, explaining the reasons for any prolonged deviation from the inflation target of 5%, as stipulated by the new Central Bank Act.