National inflation eases for third straight month in December to 59.2%

Sri Lanka’s countrywide consumer prices, measured by the National Consumer Price Index (NCPI), eased in December for the third month in a row, reflecting that the prices are continuing on their disinflation path after they peaked in September. 

The prices measured by the NCPI rose by 59.2 percent in the 12 months to December 2022, decelerating from 65.0 percent in November, as both food and non-food prices eased.

The prices measured by the Colombo Consumer Price Index (CCPI) also slowed for the third consecutive month in December to 57.2 percent, after peaking at near 70 percent in September. 

The so-called core price inflation, which doesn’t include volatile items such as food, energy and transport, slowed to 57.5 percent in December, from 60.1 percent in November. 

After raising rates by a cumulative 950 basis points in 2022, the Central Bank has left its key policy rates at 14.5 percent and 15.5 percent, respectively, to curb the excessive demand and thereby suppress inflationary pressures.  However, the pressure is mounting on the Central Bank to ease the ultra-tight monetary policy soon to provide support to the economy, which is projected to have suffered its worst annual decline last year by giving up at least 9.0 percent of the output.  The economy is expected to decline by 1 to 4 percent in 2023, according to various projections.  

Meanwhile, the food prices in December fell 0.4 percent from a month ago, reflecting that the monthly prices are on a declining path for the third straight month. 

The monthly price movements compared to the annual prices provide better direction of the near-term inflation. Meanwhile, the food prices measured annually were 59.3 percent higher in December compared to the last year but slowed from 69.8 percent in November.  

The non-food prices rose by 0.4 percent in December from a month earlier while the annual prices slipped to 59.0 percent, from 60.4 percent in November.