The Central Bank of Sri Lanka (CBSL) says that the latest projections have indicated deeper deflation than previously projected, mainly due to the more than anticipated downward adjustment in the electricity tariff announced in January 2025. 

Inflation is expected to turn positive from mid-2025 and converge towards the targeted level of 5 per cent over the medium term, supported by appropriate policy adjustments, it said.

Accordingly, headline inflation, as measured by the year-on-year change in the Colombo Consumer Price Index (CCPI), remained in the negative territory for the fourth consecutive month in December 2024. 

This was mainly driven by the previous downward revisions to electricity tariffs and domestic fuel prices, amidst subdued demand pressures. 

“Latest projections indicate deeper deflation than previously projected, mainly due to the more than anticipated downward adjustment in the electricity tariff announced in January 2025.”

“Inflation is expected to turn positive from mid-2025 and converge towards the targeted level of 5 per cent over the medium term, supported by appropriate policy adjustments. Core inflation, which is currently in lower positive levels, is projected to decelerate further over the next few months, before adjusting upwards thereafter.”