National inflation hits 45.3% in May; food prices soar 58%

National consumer prices accelerated to 45.3 percent in the twelve months to May 2022, reaching a fresh high from the 33.8 percent in April as the impact of the botched rupee float in March was still reverberating through the economy, sending the prices of everything from essentials to discretionary to durables through the roof. 

There is still no sign if the prices have peaked, but the monthly prices measured by the National Consumer Price Index decelerated to 9.7 percent in May from 10.2 percent in April. But, the persistent dollar shortage could deliver price surprises as Sri Lanka is almost entirely dependent on imports. 

Global economies are also battling decades-high prices with central banks quickening their rate increases than earlier anticipated, but the situation in Sri Lanka is much dire with the hyperinflation roiling the markets and consumer spending. 

Last week, the United States Federal Reserve raised the short-term funds rate by 75 basis points, and pencilled in another 75 or 50 basis point hike in the July meeting, upping an earlier guidance of a 50 basis point hike as inflation accelerated to a fresh forty -year high in May. 

However, Sri Lanka’s inflation is unique as its control is now beyond the Central Bank’s remit as the prices are rising not because of demand but due to supply constraints and one off price changes, which happens daily since the rupee was floated. 

Meanwhile, the core national prices, which are measured barring often volatile items such as food, energy and transport, rose by 37.7 percent in the twelve months to May from 27.9 percent through April. 

The widely watched food inflation quickened to an eye popping 58 percent, from 45.1 percent in April as nearly all items in the food basket recorded price increases in May. The non-food inflation also accelerated to 34.2 percent from 23.9 percent in April.