According to the Central Bank’s near-term projections, headline inflation, as indicated by the year-on-year (Y-o-Y) change in the Colombo Consumer Price Index (CCPI, 2021=100), remained in negative territory for the fourth consecutive month, registering a deflation of 1.7% in December 2024, compared to a deflation of 2.1% in November 2024.
Non-Food deflation (Y-o-Y) moderated to 3.0% in December 2024 from 3.3% in November 2024. Meanwhile, Food inflation (Y-o-Y) slightly increased to 0.8% in December 2024 from 0.6% in November 2024.
On a month-on-month basis, the CCPI recorded an increase of 1.19% in December 2024, driven by a 1.24% rise in the prices of items in the Food category and a 0.06% reduction in the prices of items in the Non-Food category. Meanwhile, core inflation (Y-o-Y), which reflects underlying inflation trends in the economy, remained unchanged at 2.7% in December 2024.
Looking ahead, headline inflation is expected to remain in negative territory in the upcoming months, driven by the persistent effects of significant downward adjustments in energy prices and the reduction in volatile food prices, along with the considerable base effect due to the price increases experienced in early 2024 resulting from tax amendments. However, inflation is anticipated to turn positive thereafter and gradually align with the targeted level of 5% over the medium term, supported by appropriate policy measures.