The Central Bank said the rate of inflation, as measured by the year-on-year change in the Colombo Consumers' Price Index (CCPI) (2002=100) computed by the Department of Census and Statistics, decelerated to the lowest rate of 10.7 per cent in January, 2009, from its peak of 28.2 per cent in June, 2008.

The annual average inflation rate also decelerated to 21.6 per cent in January, 2009 compared with 23.4 per cent in October, 2008.

The general price level continued to fall for the fourth consecutive month with the Index falling from 203.7 in December, 2008 to 203.1 in January, 2009 (by 0.3 per cent).

The contribution to the monthly decrease in the Index arose mainly from sub categories of Transport, Housing, water, electricity, gas and other fuels and Communication. However, the full impact of these declines was partly off-set by price increases in sub categories, recreation and culture, and Health.

The core inflation dropped marginally by 0.2 percentage points on a year-on-year basis from 15.7 per cent in December, 2008 to 15.5 per cent in January, 2009.

However, its annual average increased from 13.6 per cent in December, 2008 to 14.3 per cent in January, 2009.

As the international prices of most commodities have drifted downwards in the wake of lower demand emanating from the global economic slowdown, pressure on prices originating from imported items is likely to ease in 2009.

As a result, inflation, in terms of both the year-on-year basis and the annual average basis, are expected to follow a decelerating path in the period ahead and recede towards a single digit level on a point-to-point basis, the Central Bank said in a release.