By Uditha Jayasinghe3 Min ReadCOLOMBO (Reuters) -A key measure of Sri Lanka’s shopper inflation surged to an annual report 69.8% in September, official knowledge confirmed on Friday, highlighting the problem for the central financial institution because the island reels beneath its worst monetary disaster in seven many years.FILE PHOTO: A vendor sells greens to a buyer amid the rampant meals inflation, amid Sri Lanka’s financial disaster, in Colombo, Sri Lanka, July 29 , 2022. REUTERS/Kim Kyung-Hoon/File PhotographThe Colombo Consumer Price Index (CCPI), a number one indicator that gauges inflation in Sri Lanka’s greatest metropolis, accelerated previous the earlier all-time year-on-year excessive of 64.3% in August.Policymakers carefully observe the CCPI for his or her financial assessments.Earlier this month, Sri Lanka’s different most important inflation measure, the National Consumer Price Index (NCPI), which captures broader retail worth inflation, additionally touched a report 70.2% in August.The South Asian island of twenty-two million folks has been grappling with a dramatic surge in inflation for almost a yr as unstable world costs and a pointy depreciation within the worth of its foreign money battered the financial system.Dwindling overseas trade reserves to fund imports have intensified Sri Lanka’s disaster, inflicting shortages in necessities in an extra blowout in the price of residing.Food costs proceed to bear the brunt of the inflationary impression, climbing to 93.7%, whereas costs of non-food objects rose 50.2%, the statistics workplace mentioned.“September inflation is marginally higher than we expected. Clearly tariff increases for water and electricity made in August have partly filtered into this month as well,” mentioned Dimantha Mathew, head of analysis at First Capital Holdings.In an effort to tame costs and stabilise markets, the Central Bank of Sri Lanka (CBSL) has raised rates of interest by 900 foundation factors to date this yr.The central financial institution is predicted to face pat on charges at its Oct. 6 coverage evaluation, after holding regular in August, as policymakers are relying on an easing in inflation over coming months amid an financial contraction.Any easing in shopper costs shall be marginal at greatest, analysts say, forecasting excessive inflation charges will stay until in regards to the finish of the primary half of 2023.Sri Lanka’s financial system shrank 8.4% within the quarter by means of June from a yr in the past in one of many steepest declines seen in a three-month interval, amid fertiliser and gasoline shortages.Analysts anticipate an extra contraction within the September quarter, which might tip the nation right into a technical recession.Mathew of First Capital expects inflation to scale back marginally from October, which means costs will keep comparatively excessive for a while.Reporting by Uditha JayasingheEditing by Mark HeinrichOur Standards: The Thomson Reuters Trust Principles.