Inflation, as measured by the widely acclaimed Sri Lanka Christmas cake, has risen by 4.4% amid the depreciation of the Sri Lankan rupee, based on an analysis of retail prices. The cost of the 11 key ingredients increased to 15,180 rupees in 2025, up from 14,744 rupees in 2024, with the rupee experiencing a 5.3% inflation.
Over the 12 months leading to November, the rupee depreciated from 290.90 to 306.30 against the US dollar. This decline occurred as the central bank partially restricted currency convertibility for private citizens and purchased excess dollars beyond deflationary policy measures, further weakening the currency.
Analysts have pointed out that Sri Lanka’s currency is insufficiently protected against discretionary actions by the central bank, which operates under a flexible exchange rate system. They advocate for an inflation ceiling to mitigate inflationary pressures and to prevent future sovereign defaults, given the current inflation target floor of 5%.
In 2025, US monetary policy was relatively stable, characterized by steady quantitative tightening, which critics describe as a severe framework in the history of banking. This policy slightly moderated the country’s abundant reserve regime.
The Sri Lanka Christmas cake is a culinary delight resulting from Dutch and British influences, combining local ingredients like chow-chow and pumpkin preserve with imported ones such as sultanas, raisins, and cherries. According to SBSFood.com, “The Romans might have invented the fruitcake, but Sri Lanka, a tiny island in the Indian Ocean, perfected it.”
The cake is traditionally iced with marzipan made from local cashews rather than almonds, then sliced into small rectangles and wrapped in colored cellophane. Kitchensimmer.com notes, “Sri Lankan Christmas Cake is not your typical fruit cake. Yes, it has some fruit and nuts, but it’s got so much more rich and delicious ingredients that it’s bursting with flavor.”
As a Food52.com writer shared, “For years, I firmly believed that I had tried every single variation of the Christmas cake possible. Light, dark, moist, dry, British, Scottish, Italian, Serbian. I would have never thought that the richest, the most decadent, the most interesting, and the most delicious Christmas cake of all would come from Sri Lanka.”
Unlike traditional fruit cakes, the Sri Lanka Christmas cake uses semolina instead of flour. Semolina prices surged to 752 rupees per kilogram in 2022, partly due to a commodity bubble sparked by Covid-19-related economic interventions. Despite some blaming Putin for the inflation, the Federal Reserve began implementing deflationary policies and rate hikes in March 2022, leading to a drop in wheat prices in the latter half of the year. Semolina prices have since halved and stabilized.
However, the Federal Reserve’s deflationary policy has since concluded, with gold prices reaching 4,480 dollars per ounce in December 2025. Historically, gold was priced at 20 dollars an ounce when the Federal Reserve was established and remained so for nearly two centuries. The Fed’s introduction of open market operations has been linked to peacetime economic bubbles, which have caused significant hardships for the poor, businesses, and government finances upon bursting.
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