By Uditha Jayasinghe
Sri Lanka's Colombo Consumer Price Index rose 6.8% year-on-year in June, after a 5.5% rise in May, the Statistics Department said on Tuesday.
The index (LKCCPI=ECI), a leading indicator for broader national prices, tracks inflation in Sri Lanka's capital.
Food inflation rose to 3.6% in June from 0.9% year-on-year in May, while the non-food category rose to 8.4% from 7.8% last month.
Sri Lanka reduced diesel prices by 25 rupees and petrol prices 20 rupees on Monday for the first cut in four months and amounting to about a 6% decrease after hiking fuel costs by about 35%.
The country imports all its fuel and had to introduce fuel rationing and declare Wednesdays public holidays to manage consumption from early March.
The Central Bank of Sri Lanka (CBSL) raised its policy rate by 100 basis points to 8.75% in May, its biggest hike in three years, to counter higher inflation and a depreciating currency due to the impact of the energy shock from the U.S.-Israeli war against Iran.
"This could well be the peak. Assuming fuel prices continue to reduce, inflation may also come down to the 5% level over the next 3-4 months," said Shehan Cooray, head of research at HNB Stockbrokers.
"But fuel prices may not come down as fast as they went up."
CBSL has set an inflation target of 5% and will announce its next policy decision on July 22.