Monday May 04, 2026
Monday May 04, 2026
Monday, 4 May 2026 05:47 - - {{hitsCtrl.values.hits}}
Headline inflation, as measured by the year-on-year (YoY) change in the Colombo Consumer Price Index (CCPI), spiked in April as expected due to the impact of the Mideast war.
The Central Bank of Sri Lanka (CBSL) last week said headline inflation YoY accelerated to 5.4% in April at a faster pace compared to 2.2% in March and 1.6% in February, which was lower than 2.3% in January. Inflation was stable at 2.1% in October, November, and December 2025.
Food inflation YoY was up sharply to 2.8% in April from 0.7% in March and 0.2% in February, but remained relatively lower than 3.3% in January and 3% in December 2025.
Non-food inflation YoY accelerated to 6.8% in April, up significantly from 2.9% in March, and up from 2.3% in February and 1.8% in January.
On a month-on-month (M-o-M) basis, the CCPI recorded an increase of 2.99% in April, a sharp increase from 0.25% in March and compared to a 0.85% decrease in February.
The April increase was driven by the non-food category, which contributed 2.43 percentage points, largely owing to the increase in prices of the transport sub-category, while the food category contributed 0.56 percentage points, the CBSL said.
In March, the non-food category had contributed 0.52 percentage points also due to higher transportation costs, while the food category had contributed a negative 0.27 percentage points to the M-o-M CCPI increase.
Core inflation YoY accelerated to 2.8% in April, an increase from 2.5% in March and 2.1% in February.
The CBSL said: “The low level of inflation relative to the target of 5% that prevailed until March provided space to accommodate the impact of high energy prices and their spillovers on inflation. Amid the fluid nature of the prevailing war in the Middle East and its wide-ranging implications across both global and domestic economic activity, the inflation outlook is subject to elevated uncertainty. Despite the possible supply-driven movements in the near term, based on currently available information and assumptions, inflation is expected to remain around the target over the medium term, with the support of appropriate policies.”
In March, the CBSL had forecast inflation to reach the target of 5% in the second quarter of 2026, earlier than previously anticipated.
Former CBSL Deputy Governor W.A. Wijewardena last month said a rise in inflation beyond the CBSL’s upper bound would force a shift to restrictive monetary policy, ending the Government’s current low interest rate environment. He noted that inflation, now near zero after falling sharply from around 70% in 2023, remains below the CBSL’s 5% target band of 3% to 7%, but external shocks could push it back into range or risk an overshoot. Such an outcome would compel the CBSL to raise interest rates, directly increasing Government borrowing costs.
He also said monetary policy alone cannot sustain higher inflation within target without fiscal support, but constrained fiscal space limits effective policy coordination.
