Inflation, which reached the historically highest level in September 2022, recorded a rapid disinflation process since then, reaching lower single-digit levels towards end 2023.

Subdued demand due to the gradual transmission of the effects of the tight monetary conditions to the wider economy was the major contributor to this transition on the demand side that prevented the escalation of price pressures.

This was further complemented by tight fiscal measures.

Further, the normalisation of domestic supply conditions, moderation of global commodity prices, and the strengthening of the Sri Lanka rupee, alongside the favourable statistical base effect created by the large month-on-month increases in prices seen in 2022 also contributed to this rapid disinflation process.

Consequently, year-on-year headline inflation, measured by the Colombo Consumer Price Index (CCPI, 2021=100), decelerated to 1.3 per cent in September 2023.

Source: Annual Economic Review 2023 | Central Bank of Sri Lanka