Sri Lanka’s headline inflation rose to 8.3 percent in October from 8.0 percent in September, the Central Bank of Sri Lanka (CBSL) said on Friday.

The figure is based on the Colombo Consumer Price Index (CCPI, 2021=100) and compares prices with the same month a year earlier.

Food inflation edged up to 8.8 percent from 8.7 percent. Non-food inflation rose faster, to 8.0 percent from 7.7 percent.

On a month-on-month basis, the CCPI increased by 0.35 percent in October. The CBSL said the rise was driven mainly by the non-food category, which contributed 0.33 percentage point, largely because of higher prices in the restaurants and hotels category. The food category contributed 0.02 percentage point.

Core inflation, measured year-on-year, accelerated to 5.6 percent in October from 5.4 percent in September.

The CBSL said that, according to projections made during its September 2026 monetary policy round, headline inflation is expected to remain in the high single digits through the first quarter of 2027 before easing towards the 5 percent target. It said inflation is expected to stay around the target over the medium term, supported by appropriate policy measures.

The CBSL added that these projections depend, among other assumptions, on the tensions in the Middle East and their spillover effects gradually dissipating.

Background

The CCPI tracks the cost of a basket of goods and services bought by households in the Colombo district, and it is the measure the CBSL uses to report headline inflation each month. The year-on-year rate shows how much higher prices are than they were twelve months earlier, while the month-on-month change shows how much they moved since the previous month.

Core inflation is a narrower measure that leaves out the most volatile items, such as fresh food and energy. Central banks watch it to judge whether price pressures are broad or the result of short-term swings in a few items.

The CBSL has set an inflation target of 5 percent under the inflation-targeting framework it has adopted. It uses its policy interest rate to steer inflation towards that level, and it publishes its projections after each monetary policy round.

What it means

An inflation rate of 8.3 percent means that, on average, the goods and services in the CCPI basket cost 8.3 percent more in October than a year earlier. For households, that raises the cost of everyday spending, including meals eaten out and hotel stays, which the CBSL named as the main source of the monthly increase.

The CBSL’s projection that inflation will stay in the high single digits until at least the first quarter of 2027 means that the gap between prices and the 5 percent target is expected to remain for some months. Sri Lankans abroad who send money home may find that each rupee received buys somewhat less than a year ago, although the effect depends on the goods and services a family buys.