The Colombo Consumer Price Index fell absolutely for the second month running to 165.5 points from 165.7 points a month earlier. In August the index fell 1.0 point.
The food and beverages sub index (with alcohol excluded due to the current administration's Mathater Thither or anti alcohol policy) fell 0.3 points to 185 points in the month, while non foods rose 0.1 percent.
The moving average of the index, a lagging indicator averaged across two years continued to rise to 6.5 percent in September from 6.3 percent in August.
Sri Lanka's inflation spiked amid a balance of payments crisis triggered by heavy money printing to accommodate state credit taken to finance energy subsidies by the state which sent the rupee plunging to 134 to the US dollar from 110 a year earlier
However after energy prices and interest rates were raised after two billion US dollars of foreign reserves were lost and credit has slowed allowing inflation to moderate.
Inflation has also slowed after previous balance of payments crisis as slowing or contracting credit is supported by a gently appreciating exchange rate to bring down prices of traded goods.
The rupee has so far appreciated to about 129.50 to the US dollar from lows of 134.00 to the US dollar in mid 2012.
Analysts say the rupee has to appreciate against the anchor US currency, as a fresh bout of money printing (quantity easing) by reserve currency central banks threatens to push global inflation higher.
Sri Lanka's rupee is pegged to the US dollar and the inflation generated by the Federal Reserve as the anchor currency central bank tends to set a floor on prices, through traded goods. The phenomenon is generally known as 'imported' inflation.
Sri Lanak's central bank has also been firm on its policy rates, signaling that future inflation is likely to be low. Long term risk free yields in particular have started to fall.