Colombo Inflation Inches Up Despite Deflationary Measures
- CNL Reporter
- August 31, 2025
- News, Political
- Colombo Inflation
- 0 Comments
Sri Lanka’s capital Colombo has recorded a modest rise in inflation over the past 35 months, official data showed, reflecting the lingering effects of the central bank’s deflationary policies.
According to the Department of Census and Statistics, consumer prices in Colombo rose 2.0 percent since September 2022, when the central bank’s policy measures began impacting the balance of payments. Over the 12 months to August 2025, consumer prices increased by 1.2 percent.
Monthly figures indicate a slight easing, with the Colombo Consumer Price Index (CCPI) falling 0.4 percent in August to 193.3 points, following a 0.2 percent decline in July. The index has returned to levels last seen in November 2023. However, drops below 190 points in September and October 2024 may contribute to higher annual inflation in the coming months.
The food price sub-index, which had surged during the 2022 crisis, saw a sharp decline from 249.3 points in July 2025 to 239.4 in August, now standing 3 percent below September 2022 levels.
The money market has experienced high excess liquidity, partly driven by dollar-rupee swaps early this year, though this has eased over time. The central bank has maintained a broadly deflationary stance since mid-2022, but recent interest rate cuts have raised concerns about lower foreign exchange collections and the impact of rupee liquidity injections on reserve levels.
Analysts say the modest inflation trend suggests gradual price stability, though ongoing market interventions and policy adjustments will be key to sustaining controlled inflation.
