Prices fell in absolute terms for seven months running from October to April before reversing direction. Inflation showed up most in food prices.
The food and beverage price index, which is 46.7 percent of the index rose from 210.8 points in April to 222.1 points in July almost to the so called 'food crisis' levels seen last year. In June 2008 the food price index hit 222.0 points.
Global food prices have also been moving up, but Sri Lanka has ratcheted up taxes on most imported foods to 'protect' farmers, who already get fertilizer subsidies.
HSBC regional economist Prakriti Sofat says international commodity prices have also been moving up.
"History suggests that domestic food prices are highly related to international price movements given the high degree of food imports in the country," Sofat said.
"The correlation of food inflation with The Economist food price index in local currency terms is 0.80 at a lag of three months.
"Even if we assume that international food price stabilise at current levels, this implies a sharp upward movement in food prices at home," she said.
Rising food prices can however squeeze spending on other items and push the prices of not tradables down, unless it is validated by an expansion of money supply.
Sri Lanka has a peg with the US dollar, and dollar inflation flows into the country through the de facto external anchor. But it is amplified by the country's discount window and ad hoc money printing to finance the government.
But overall the central bank has been steadily sterilizing inflows, following a recovery from a balance of payments crisis.