Sri Lanka Sees 0.6% Rise in National Consumer Prices in June After Electricity Tariff Hike

Sri Lanka’s national consumer prices rose by 0.6% in June compared to May, mainly driven by a 15% hike in electricity tariffs introduced mid-month. This increase, aimed at aligning costs with IMF program conditions, pushed non-food prices up by 0.3%, reversing May’s slight decline of 0.1%.

On a year-on-year basis, overall prices rose by 0.3% in June, down from the 0.6% recorded in May. The rise marks a continued recovery from the eight-month deflationary period, which ended in May.

Food prices rose by 0.8% in June, slightly easing from a 1.2% increase the previous month. Year-on-year food inflation stood at 4.2%, down from 5.9% in May.

Meanwhile, non-food annual inflation continued to show a decline at -2.8%, though it was a slight improvement from -3.4% in May. The electricity tariff revision played a key role in pushing non-food prices back into positive monthly territory.

The Colombo Consumer Price Index, which policymakers rely on for monetary decisions, showed a 0.6% monthly decline in June, but prices are expected to turn positive from July, suggesting the end of the deflation trend.

The Central Bank of Sri Lanka, which cut its Overnight Policy Rate to 7.75% in May, is optimistic inflation will reach its 5% target by year-end. The next Monetary Policy Board meeting is scheduled for tomorrow, with expectations mounting over possible further rate cuts.