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Sri Lanka inflation rises to 6.5-pct in Jan 2024, above 5.0-pct target

Sri Lanka's inflation measured by the Colombo Consumer Price Index (CCPI) reached 6.5% in the 12 months leading up to January 2023. This rate is above the statutory target of 5% but within the permissible 2% variation. The increase was influenced by a 2.9% rise in the index during the month, partly due to a 3% hike in value-added tax affecting most goods and services, including those previously exempt from VAT.

Since September 2022, when monetary stability was achieved, the CCPI index has increased by 6.0%. The central bank's deflationary policy, which has resulted in a balance of payments surplus and an appreciation of the exchange rate, contributed to this trend, as a stronger currency typically lowers the cost of imports and helps contain inflation.

Food prices experienced a 3.8% increase during the month, partly due to sharp rises in some vegetable prices following floods. Non-food items saw a 2.5% increase in prices. These factors combined to drive the overall inflation rate above the central target but within the allowed variation range.

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