The National Consumer Price Index decelerated sharply to 1.6 percent in May, from 2.7 percent in April, as food prices eased while non-food prices remained nearly unchanged compared to a year ago.
On a monthly basis, national inflation fell by 0.9 percent in May from April levels, continuing a months-long deflationary trend, with both food and non-food prices falling.
Compared to the Colombo Consumer Price Index, which measures average prices in the capital city, the national inflation index comes out with a 21-day lag.
There is a possibility, however, for prices to reverse course in June and increase, given significantly higher vegetable prices due to incessant rains.
The slight reversal in rupee appreciation seen in May and June has yet to significantly impact prices, mainly due to stable global energy prices.
Fuel and gas prices were reduced in Sri Lanka starting June to provide relief to the public ahead of elections. Excluding volatile food, energy, and transport prices, prices rose by 3.1 percent year-on-year through May, up from 3.0 percent in April.
In May, food prices rose by 0.5 percent, sharply slower than April's 3.3 percent year-on-year increase, with monthly food prices declining by 1.6 percent following a 1.4 percent decline in April.
Non-food prices rose by 2.4 percent year-on-year through May, slightly up from 2.3 percent in April, but monthly measurements continued to decline by 0.3 percent after a 0.5 percent decline in April.
The Central Bank maintains its medium-term inflation target between 4 and 6 percent.
Current inflation risks are present but not considered threatening.
In 2022, the Central Bank misjudged inflation by aggressively raising interest rates, believing it was caused by demand pressure. However, this year's study by the Central Bank revealed that the 2022 inflation spike was primarily due to supply constraints.
