Deeper than expected deflation lies ahead

Tharushi Nimeshika
Tharushi Nimeshika

The Central Bank of Sri Lanka (CBSL) said that the outlook for the current fiscal year is likely to be more subdued than previously projected, mainly due to the lower-than-expected adjustment in electricity tariffs announced in January 2025.

However, the CBSL further stated that inflation is expected to turn positive from mid-2025 onwards and is expected to reach the 5% target level in the medium term, supported by appropriate policy adjustments.

Headline inflation, as measured by the annual change in the Colombo Consumer Price Index (CCPI), remained negative for the fourth consecutive month in December 2024. The CBSL said that this was mainly due to downward revisions in electricity tariffs and domestic fuel prices, despite the easing of demand pressures.

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