National consumer prices rise 2.7% in April as both food & non-food prices remain soft

• Central Bank largely expected to keep rates unchanged next week as previous cuts doing their work 

Consumer prices measured nationally rose by 2.7 percent in April from a year ago, slightly higher from 2.5 percent in through March as the non-food prices rose somewhat faster.

However, the prices still came down by 0.9 percent in April measured on a monthly basis, supported by decline in the prices of both food and non-food prices from a month ago.

Sri Lanka’s inflation has consistently been on single digit levels since July last year as the global commodities prices came down while the supply chains which lost balance during the pandemic came into better balance while the Central Bank made the monetary policy bone crushingly tight causing demand to trim.

The national food prices rose by 3.3 percent in the year through April, slowing from 5.0 percent in March but the prices measured monthly fell 1.4 percent, at a slower pace than the 2.1 percent decline between February and March.

Monthly food prices have been in deflation for three consecutive months. Meanwhile, the non-food prices which had a larger bearing on the April price index accelerated to 2.3 percent from 0.7 percent through March.

On a monthly basis, such prices declined by 0.5 percent from a 2.0 percent decline in March.

Monthly prices softened predominantly due to lower electricity tariffs and LP gas prices, followed by decline in exercise books and stationeries prices as the new school season began after the New Year holiday in April.

Prices however continued to rise in categories such as transport and clothing.

Meanwhile, the so-called core prices measured barring the often volatile food, energy and transport rose by 3.0 percent, decelerating from 3.4 percent through March reflecting that the underlying price pressures in the economy is softening.

This provide more wiggle room for the Central Bank to loosen monetary policy as the price stability was re-established earlier than many would have anticipated.

While the next monetary policy announcement is due next week, it is expected that the Central Bank would hold the rates at the current levels as both the government securities yields and the market lending rates have broadly come down to single digit levels, making possible the credit flows into the real economy.