CCPI based headline inflation eased further in March 2023

Headline inflation, as measured by the year-on-year (Y-o-Y) change in the Colombo Consumer Price Index (CCPI, 2021=100) decreased to 50.3% in March 2023 from 50.6% in February 2023. The decline in the headline inflation is broadly in line with the disinflation path envisaged by the Central Bank of Sri Lanka (CBSL) in 2023.

The Food inflation (Y-o-Y) decreased to 47.6% in March 2023 from 54.4% in February 2023, whereas the Non-Food inflation (Y-o-Y) increased to 51.7% in March 2023 from 48.8% in February 2023. Monthly change of CCPI recorded at 2.92% in March 2023 due to price increases observed in items of Non-Food category, which was 3.71%. However, the Food category recorded a monthly decline of 0.79%. The core inflation (Y-o-Y), which reflects the underlying inflation in the economy, decreased to 39.1% in March 2023 from 43.6% in February 2023.

Looking ahead, based on the available information, the anticipated declining trend of inflation is expected to continue through 2023. This disinflation process is would be supported by subdued demand conditions owing to tight monetary and fiscal policy measures, softening of food and energy prices amidst the recent exchange rate appreciation and greater pass-through of lower global commodity prices, second round impacts of recent fuel price revisions, and anticipated improvements in domestic supply conditions, along with the favourable statistical base effect.

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