Sri Lanka’s inflation sees upward pressure in the medium term from global energy prices, adverse weather and possible upward revisions of electricity tariffs, the Central Bank of Sri Lanka(CBSL) said.

According to CBSL’s headline inflation projections, there are upside risks to inflation projections stemming from factors such as the impact of possible upward pressures on global energy prices amidst uncertainty.

It said that the impact of adverse weather on agricultural production and in turn on food prices; possible upward revisions to electricity tariff; and any exchange rate depreciation more than the levels considered in the projections would push the inflation up.

Meanwhile, Central Bank projections said downside risks to inflation projections include the sustained impact of the public's diminished purchasing power and further easing supply conditions. 

“In the near term, inflation is likely to be below the target level of 5% as per the latest available data, although some upside risks remain. Inflation is expected to align with and remain around the target level over the medium term, supported by appropriate policy measures,” CBSL said.

Headline inflation, as measured by the year-on-year (y-o-y) change in the Colombo Consumer Price Index (CCPI,)  decelerated to 0.9% in May from 1.5% in April. 

Food inflation remained unchanged in May compared to 2.9% in April, nevertheless, Non-Food inflation accelerated to 1.3% in May from 0.9% in April.