Consumer inflation slows to 22.1% in May

COLOMBO; Sri Lanka’s National Consumer Price Index (NCPI) inflation eased to 22.1% year-on-year in May after a 33.6% rise in April, the statistics department said in a Reuters report.

The NCPI captures broader retail price inflation and is released with a lag of 21 days every month.

Food price rises eased to 15.8% in May from 27.1% in April, while non-food inflation was at 27.6%, the Department of Census and Statistics said in a statement.

Soaring inflation has battered the economy for more than a year after a severe foreign exchange crisis set off the Indian Ocean island’s worst financial crisis in seven decades.

But after securing a $2.9 billion bailout from the International Monetary Fund (IMF) in March, Sri Lanka is experiencing a glimmer of relief with inflation easing, its currency appreciating and reserves improving.

The island’s central bank cut interest rates by 250 basis points earlier this month, for the first time in three years, as it shifts focus to improving growth.

Inflation, which was at one point among the highest in the world, could reach single digits as early as September, according to analysts.

“This is in line with expectations. Given the high base effect, after the next two months inflation will likely reach single digits,” said Shehan Cooray, head of research at Acuity Stockbrokers.

“A stronger rupee is helping food and power prices come down faster, which is also helping prices reduce.”

Sri Lanka’s economy is expected to shrink by 2% this year after a 7.8% contraction in 2022.

The Colombo Consumer Price Index, released at the end of each month, dropped to 25.2% in May from 35.3% in April, data from the statistics department showed