National inflation flirts with 60% in June

• Food prices up by 76%; non-food by 44%
• Core inflation at 49.3% up from 37.7% in May  

 Sri Lanka’s red-hot inflation firmed up in June as the country’s broader measure of consumer prices climbed 58.9 percent from a year ago, accelerating from 45.3 percent in May.

Prices measured by the National Consumer Price Index (NCPI) have been hitting fresh highs every month since the beginning of this year after the already elevated global commodities prices collided with Russia’s invasion of Ukraine, which sent global energy and other commodities prices spiralling up. 

These events sent ripple effects through the global markets which became more pronounced in the local market due to acute dollar shortage and the botched currency float which sent the value of the rupee down by 80 percent since March 07, causing the prices of every local commodity and service to surge.  

A fortnight ago the Central Bank forecasted that the inflation could further quicken to 70 percent in the near future and thus increased the borrowing rates by 100 basis points to further rein in demand to the level of available supply as they have no direct control over the latter which is mostly caused by the exogenous factors.

Reflecting the Central Bank’s anguish over future inflation, the monthly prices measured by the NCPI accelerated to 10.9 percent in June from 9.7 percent in May over its previous month. 

Typically, monthly prices provide some direction over where the future prices could be heading, and June didn’t provide any signs of whether they had either peaked or begun to ease.  

Meanwhile, food prices charged by 75.8 percent in the twelve months to June, accelerating from 58.0 percent in May, signalled that people are now spending nearly twice as much as they spent last year just to feed their families. But their wages haven’t kept up.

The monthly food prices also quickened by 14.2 percent from 10.7 percent in May, reflecting the prices are far from cooling. 

Meanwhile, the non-food inflation accelerated to 43.6 percent in the twelve months to June from 34.2 percent in May mainly due to the transport subcategory which came from the June revision of fuel prices and the resulting bus fare hike. 

In an interesting revelation, although the taxi and the three wheeler fares were also raised in line with the fuel price hike, its impact on the inflation has been reduced to a negligible minimum, reflecting that people aren’t using them for their commute as they did before the crisis as the multifold increase in taxi fares made such services virtually unaffordable. 

The so-called core prices measured barring the often volatile items such as food, energy and transport, rose by 49.3 percent in June, up from 37.7 percent.