Headline inflation, as measured by the year-on-year (Y-o-Y) change in the Colombo Consumer Price Index (CCPI, 2021=100) increased to 6.4% in January 2024 from 4.0% in December 2023. This increase in the headline inflation is mostly in line with the projections envisaged by the Central Bank of Sri Lanka (CBSL).
The Food inflation (Y-o-Y) increased to 3.3% in January 2024 from 0.3% in December 2023, while the Non-Food inflation (Y-o-Y) increased to 7.9% in January 2024 from 5.8% in December 2023. Monthly change of CCPI recorded 2.87% in January 2024 due to the price increases of 1.21% observed in the items of Food category and 1.66% observed in the items of Non-Food category. Meanwhile, the core inflation (Y-o-Y), which reflects the underlying inflation in the economy, increased to 2.2% in January 2024 from 0.6% in December 2023.
As expected, inflation accelerated in January 2024 mainly due to tax adjustments implemented at the beginning of the month and weather related disruptions to food supply. A temporary uptick in inflation could be observed in the near term as communicated by the Central Bank. However, such increase in inflation is expected to dissipate over time and inflation is expected to stabilise around the targeted level of 5 per cent over the medium term, supported by well-anchored inflation expectations and appropriate policy measures.