• Existing stocks provide a buffer
• No significant change in wholesale prices

No major price increase has been observed in the market following the exchange rate volatility recorded over the preceding two weeks, according to the Consumer Affairs Authority (CAA), with the regulator expressing confidence that the turbulence is unlikely to translate into a meaningful upward price adjustment.

Speaking to The Sunday Morning Business, CAA Chairman Hemantha Samarakoon stated that although there was some turmoil in the market driven by expectations of a prolonged currency depreciation following the sudden spike in the exchange rate in recent weeks, the subsequent recovery of the exchange rate had tempered those concerns.

“It is unlikely that there will be a significant spike in prices in the market because the exchange rate has fallen back. All of that happened within a period of around a week,” he stated.

He further noted that stocks already existing within the country provided a buffer, adding that a meaningful price impact would only have materialised had the elevated exchange rate persisted for a period exceeding two to three weeks. 

The CAA Chairman also revealed that the authority had held discussions with importer associations, and that according to them, there had not been a significant change in the wholesale prices being quoted.

Responding to queries on the recent increase in milk powder prices, Samarakoon drew a clear distinction between that specific adjustment and broader market pricing trends. 

He stated that milk powder importers had held their prices through the New Year season and that those prices had been maintained since the exchange rate was around Rs. 300 per US Dollar. 

He further claimed that the milk powder importers had absorbed cost pressures for as long as commercially viable before approaching the authority.

“We gave our consent to the price hike after taking a look at their costs and studying the international market. These organisations were unable to operate at those price levels, considering the increase in freight and insurance costs due to the ongoing Middle Eastern conflict,” he explained. 

Samarakoon further noted that the increase was not unilateral and that importers had given the authority due warning before acting.

The CAA Chairman opined that another milk powder price hike was unlikely in the near term, provided the exchange rate remained stable. He was careful to qualify, however, that even the CAA would be unable to prevent a price increase should the exchange rate depreciate again and remain at elevated levels for a prolonged period.

On the question of reintroducing a pricing formula for milk powder similar to the mechanism in place prior to 2021, Samarakoon stated that the authority had no plans to do so at present.