COLOMBO Sri Lanka's key inflation rate eased to 4% in August from 6.3% a month ago, the statistics department said on Thursday, marking continued stabilisation for the crisis-ridden economy.

Soaring inflation has battered the economy for more than a year after a severe foreign exchange shortage triggered the Indian Ocean island's worst financial crisis in seven decades. The Colombo Consumer Price Index (CCPI) reflected food inflation reaching a negative 4.8% in August, after hitting a negative 1.4% in July. Non-food inflation was 8.7%, the Census and Statistics Department said in a statement.The Colombo Consumer Price Index, a lead indicator for broader national prices, tracks inflation in Colombo, Sri Lanka's biggest city.

(Reporting by Uditha Jayasinghe in Colombo; Editing by Bernadette Baum)