Electricity tariff cut brings consumer prices further down in February

• Colombo prices decline 4.2% from a year ago as non-food prices fall 6.1% steeper on lower power tariffs
• Headline prices have now fallen in a row for sixth months

Sizeable cut to electricity tariffs in the third week of January brought consumer prices in the Colombo district further down in February. This is while some of the food prices such as rice which were soaring saw some easing, providing further relief to the consumer who was beaten by over 70 percent increase in everyday goods a couple of years ago. Consumer price changes measured by the Colombo consumer price index fell by 4.2 percent in the twelve months through February 2025, at a faster pace than the 4.0 decline in prices seen through January.

Headline prices have now fallen for the sixth months in a row after setting off this current stretch of deflation back in September 2024.  

Prices measured on a monthly basis too flipped into negative, as the monthly prices fell by 0.2 percent due to the sharp fall in non-food prices triggered by the cuts to the electricity prices. This was a turning from the 0.5 percent increase seen in January over December 2024 levels. Food prices measured on an annual basis through January slipped 0.2 percent due to a fall in prices of some of the staples such as rice which became a pain point for much of the last couple of months for both the government and the people.

Further, prices of fresh fish, dried fish, potatoes and big onions came down while the prices of coconuts, fresh fruits and vegetables rose sharply during February. As a result, the prices measured on a month basis for food rose slightly by 0.3 percent, at a similar level to January.

Meanwhile, the non-food prices fell by a sharp 6.1 percent in the year through February 2025 and by 0.5 percent for the month, largely due to the cut to the electricity tariffs in the third week of January.

The core-prices, which are measured stripping out the often volatile food, energy and transport, rose by 0.7 percent in the twelve months to February 2025, slowing from the 1.2 percent increase seen through January 2025. The Central Bank reiterated that the current stretch of negative prices would continue through the first quarter before turning to positive from the second. However, they expect the inflation to converge to their medium term target of 5.0 percent in the second half before surpassing that level by about 2.0 percentage points in the second quarter in 2026 briefly.

Source: Daily Mirror