SL’s headline inflation to hit 70% within few months-CB Governor

Sri Lanka’s headline inflation is likely to increase to 70 per cent in the coming months from the current level of 54.6 per cent, Governor of the Central Bank, Dr. Nandalal Weerasinghe told a media conferences in Colombo on Thursday.

The major task and priority of the Central Bank is to control inflation and going forward and bring it down to a reasonable level as soon as possible, Dr. Weerasinghe said.

“If you look at the impact of inflation on segments of people, the first and hardest hit would be the poor and vulnerable.”

If inflation goes beyond control, to hyperinflation situation, no one will be able to continue their businesses, he added.

According to the Central Bank, in June headline inflation was at a record high of 54.6 per cent, driven mainly by inflation in groups such as transport, restaurant and hotel, food and non-alcoholic beverages. In the month of June, overall food inflation was recorded at 80.1 per cent, while non-food inflation was at 42.4 per cent.

The Central Bank noted that the major factors that contributed to the unprecedented high-level acceleration in headline inflation were the global energy and food price hikes and associated pass through to domestic prices, domestic supply side disruptions along with the impact of the depreciation of the rupee, tax adjustments and the lagged impact of monetary accommodation.

In the near term, there will be some acceleration in headline inflation until the end of this year, however, a significant deceleration is expected starting from the beginning of the year 2023. Headline inflation will reach the medium-term level of 46 per cent range by 2025, the Bank said.

This will be facilitated by both global and domestic developments. Major global developments will include a downward trend of food inflation and oil prices. This has to be supported by appropriate policy measures from the local authorities including monetary and fiscal tightening that will subdue aggregate demand pressures in the period ahead.