Sri Lanka's Central Bank says that the spillover effects of tax measures and other developments are likely to be muted due to subdued underlying demand pressures; hence, this rise in inflation is expected to be transitory.
A one-off upward movement in inflation is expected in the near term, driven mainly by the changes to the Value Added Tax (VAT) proposed by the Government effective January 2024.
Accordingly, headline inflation over the medium term is expected to converge towards the targeted level of 5 per cent, supported by appropriate policy measures.
Both CCPI and NCPI based core inflation (year-on-year), which reflects underlying demand pressures in the economy, moderated further in October 2023, reflecting the subdued demand pressures in the economy.
Headline inflation, as measured by the year-on-year change in the Colombo Consumer Price Index (CCPI, 2021=100), was recorded at 1.5 per cent in October 2023, compared to 1.3 per cent in September 2023.
The National Consumer Price Index (NCPI, 2021=100) based headline inflation (year-on-year) was recorded at 1.0 per cent in October 2023, compared to 0.
8 per cent in September 2023.