2 percent in June, the government's statistics office said.
High inflation has also made it more expensive for companies to borrow. In the month of July prices rose 0.2 percent compared with an increase of 3.7 percent in June according to the most widely watched Colombo Consumer Price Index (CCPI).
The government changed the weights of the index and its base year after inflation hit 29.9 percent in April.
The annual average inflation rate rose to 21.9 percent in July from 21.0 percent in June.
The island's inflation had been raging since the middle of 2007 amidst loose monetary policy but the central bank has been saying that it should moderate later in the year.
The central bank has tightened monetary policy this year but analysts say it has found it difficult to rein in inflation as the policy interest rate has been kept far below inflation at 12.
0 percent.
The record high inflation has made it difficult for businesses and consumers alike.
Exporters have been particularly badly hit as the central bank has been holding the ex