Sri Lanka’s inflation climbs to 7.3% in July, highest since early 2025

Sri Lanka’s headline inflation picked up pace in July, with the Colombo Consumer Price Index (CCPI) rising to 7.3% year-on-year, up from 6.8% in June, according to Central Bank data released this week.

The uptick was driven largely by a jump in housing rents, which pushed non-food inflation contributions higher for the month, along with a base effect on food prices that saw food inflation nearly double to 6.3% from 3.6% in June.

Interestingly, non-food inflation on a yearly basis actually eased slightly, slipping to 7.8% from 8.4% the month before. But it was the monthly movement that told the real story: the CCPI rose 0.24% in July, with housing costs alone responsible for the bulk of that increase.

Core inflation, which strips out volatile items like food and energy to give a cleaner read on underlying price pressure, also ticked up, reaching 4.4% in July compared to 4.0% in June.

The Central Bank operates under an inflation targeting framework agreed with the Ministry of Finance in 2023, aiming to keep headline inflation anchored around 5% over the medium term. Current projections suggest inflation will stay above that target in the near term before gradually converging back toward it, assuming policy settings hold and no fresh shocks emerge.

The Bank flagged persistent uncertainty tied to the ongoing situation in the Middle East, noting that its ripple effects on global supply chains and domestic economic activity could still alter the inflation path in either direction.

For now, the numbers point to a modest but noticeable resurgence in price pressures after a period of relative calm, with housing costs emerging as the category to watch in the months ahead.