Colombo inflation declines 0.5% in September on low food and fuel prices

Inflation in the Colombo district fell in September, after slowing substantially in August, as both food and non-food prices declined in tandem, due to the increased supply conditions as well as the cut in fuel prices and water tariffs.

The prices measured by the Colombo Consumer Price Index, the most watched price gauge, declined by 0.5 percent September 2024 over the same period last year, compared to 0.5 percent rise seen through August.

Measured on a monthly basis, the prices fell by 0.1 percent in September, slowing from the 1.8 percent decline in August.

The repeated cuts to administrative prices in the last couple of months took away much of the price pressures the people were confronted with, putting some money back in the pocket books of the people, relieving them of price pressures somewhat which they had been grappling with for the last three years.

The prices measured barring the often-volatile food, energy and transport categories, which are also referred to as core-inflation, rose by 3.3 percent in the year through September 2024, slowing from the 3.6 percent increase seen through August.

The food prices measured on an annual basis fell by 0.3 percent, turning from a 0.8 percent increase in the month before while the monthly food prices too followed suit, declining by 0.6 percent after falling 2.0 percent in August.

The improved supply conditions followed by the lower energy prices helped to bring the prices of many food items, including the vegetables and chicken down. Meanwhile, the non-food prices fell by 0.5 percent after rising by 0.4 percent in August from a year ago.The monthly non-food prices rose by only 0.1 percent in September 2024, after a months-long decline. The repeated cuts to fuel prices and the downward price revision to water helped to offset the increases in some of the other categories such as education and healthcare in September.

The Central Bank last week said there could be some short-term disinflation predominantly due to the downward revisions to administered prices before converging and likely overshooting their medium-term inflation target of 5.0 percent in the second half of next year.

The Central Bank will report to the new Parliament via a report to the Finance Ministry once it is convened after the November elections with reasons for undershooting the inflation target, as the new Central Bank Act requires them to do so when the inflation comes in plus or minus 3 percent from the quarterly target of 5 percent for a prolonged period, explaining how the inflation could be brought back to the desired level.