Courtesy The Daily Mirror

• Deceleration in monthly prices stoke hopes on a consumer price pivot from October
• Water and electricity tariff hike drives Sept. non-food and overall consumer inflation 
• UK offers a case for how markets stump governments, which come up with inflationary policies 

Sri Lanka’s inflation measured by the National Consumer Price Index (NCPI) showed a relentless increase through September, as the prices continued their ascent over and above 70 percent for the second month in a row but the recent monthly price movements have galvanised expectations for the prices to have turned a corner.    

Sri Lanka’s broader consumer price index showed the prices galloped 73.7 percent in September on an annual basis, accelerating from 70.2 percent in August but the monthly prices, which showed some deceleration in the last three months, have made the case to believe that the prices may have peaked last month. 

The headline prices in September rose by 2.3 percent between August and September, decelerating from 2.5 percent and 5.6 percent in the previous two months, stoking hopes for cooling prices in the next inflation print. 
The national prices are a relatively lagging indicator, which is released after 21 days since the end of the month but a more recent indicator of inflation, the Colombo Consumer Price Index, which acts as the officials’ preferred inflation gauge, reported a 69.8 percent rise in annual prices for September. 

Authorities expect inflation cannot shoot any higher.
The food inflation came in at 85.8 percent in September from a year ago, up slightly from 84.6 percent through August. However, the worst could be over, as the monthly prices rose by 0.7 percent, from 1.7 percent in August, a trend which is seen from July. 

In recent weeks, the prices of certain essential commodities were revised down after some cooling in global commodities prices and the improvement in the supply and foreign exchange conditions. 

The non-food inflation in Sri Lanka rose by 62.8 percent, accelerating from 57.1 percent in August while the monthly prices also climbed to 4.0 percent, from 3.2 percent. The water and electricity price revisions were the biggest contributors for the non-food inflation in September. 

The so-called core prices measured barring food, energy and transport, rose by 64.1 percent on an annual basis from 60.5 percent through August, reflecting that the underlying price pressures in the economy still exist even after leaving out the often-volatile items. 

Inflation is a global issue being battled by every country with the exception of China. The United Kingdom (UK) offered a classic case this week how the markets brought an abrupt end to a government, which thought they could stoke growth through borrowings by slashing taxes and splashing subsidies to protect homes and businesses from rising energy bills at a time  when inflation and the interest rates were fast rising. 

The UK also offers a learning for any government, which may be thinking it could find its way through unfunded fiscal largesse through borrowings from the market, as markets have become ruthless since this year in penalising any kind of fiscal slippage or inflationary policy, a stark difference from a year ago when the governments could fund their budgets at interest costs next to nothing.