In line with the Central Bank’s near term projections, headline inflation, as measured by the year-on-year (Y-o-Y) change in the Colombo Consumer Price Index (CCPI, 2021=100)1 remained in the negative territory for the fifth consecutive month, recording a deflation of 4.0% in January 2025 compared to the deflation of 1.7% in December 2024.
Non-Food deflation (Y-o-Y) increased to 4.7% in January 2025 from 3.0% in December 2024. Further, food category also recorded a deflation (Y-o-Y) of 2.6% in January 2025 compared to an inflation of 0.8% recorded in December 2024.
On a month-on-month basis, the CCPI recorded an increase of 0.47% in January 2025 due to the 0.11% increase in the prices of items in the Food category and the 0.36% increase in the prices of items in the Non-Food category.
Core inflation (Y-o-Y), which reflects the underlying inflation trends in the economy, decelerated to 1.2% in January 2025 from 2.7% in December 2024. Latest projections indicate deeper than previously projected deflation in the immediate future, mainly due to the more than anticipated downward adjustment in the electricity tariff announced in January 2025.
Nevertheless, inflation is expected to turn positive thereafter and gradually align with the targeted level of 5% over the medium term, aided by appropriate policy measures.
