The central bank holds its rate as core inflation and the import bill keep climbing

Headline inflation in Colombo was 8.0% in September 2026, unchanged from August and up from 1.5% a year earlier. It has been above the central bank's 5% target every month since April 2026.

Core inflation, which leaves out volatile items such as fresh food and energy, rose to 5.4%, from 5.1% in August. That is its highest reading since July 2023, when prices were still coming down from the 2022 crisis. Food inflation edged up to 8.7%.

Transport is still the fastest-rising group, 16.3% dearer than a year ago, followed by restaurants and hotels at 11.5%. Recreation and culture cost 3.1% less.

Fuel is getting dearer again. The Ceylon Petroleum Corporation (CPC) said in a media release on 30 September (as reported by Newswire) that its prices would rise from 1 October: Auto Diesel by Rs 10 to Rs 392 a litre, Super Diesel by Rs 50 to Rs 528, and Octane 92 petrol by Rs 15 to Rs 414. Octane 95 petrol and kerosene are unchanged.

The central bank has left its rate unchanged

The Central Bank announced on 30 September that it had kept its overnight policy rate at 8.75%. The rate has stood there since 26 May 2026, when it was raised from 7.75%, the first increase since the single policy rate was introduced on 27 November 2024.

When the rate was raised in May, the latest inflation figure was April's 5.4%. With inflation now at 8.0%, the policy rate is less than a percentage point above it.

Imports are growing much faster than exports

Merchandise exports were USD 1,240 million in August, 3.3% lower than a year earlier. Imports were USD 1,914 million, 12.8% higher. Imports have not fallen below their level of a year earlier since May 2024, and in April 2026 they reached USD 2,457 million, the most in any month since the series began in 2007.

The current account has slipped into deficit

The wider gap in goods trade shows in the balance of payments. The current account, which adds services, income and remittances to trade in goods, ran a deficit of USD 986 million in the second quarter of 2026, its widest since 2022 Q1. In the first quarter it had a surplus of USD 704 million.

The monthly figures suggest the deficit eased after April: in August the current account was back in surplus, by USD 133 million. Workers' remittances, at USD 749 million in August, were 10.0% higher than a year earlier, and gross official reserves, which include the swap facility with the People's Bank of China, stood at USD 6,905 million at the end of the month, a provisional figure.