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Sri Lanka inflation hits 11-year low in February 2015

Feb 27, 2015 15:36 PM GMT+0530 | 0 Comment(s)

TAX EFFECT:  Milk powder a common ingredient is tea is one of the prices that has come down as a result of recent budget moves.

COLOMBO (EconomyNext) - Sri Lanka's consumer prices rose 0.6 percent in the 12-months to February 2015, slowing sharply from 3.2 percent in January, the lowest since the 0.5 percent reported in January 2004.

The index dropping 2.3 percent in the month, the state statistics office said.

The Colombo Consumer Price Index fell to 178.9 points by end February from 183.2 points in January as the state cut fuel prices and taxes in a number of consumer goods.

Foods dropped 2.1 percent and non-foods dropped 2.6 percent during the month.

The statistics office said this year's inflation is expected to be between 3-4 percent.

Though an index can fall due to tax cuts analysts warn that credit pressure on the banking system has worsened as a result of higher state spending, which can raise inflationary pressures.

Sri Lanka is just recovering from a balance of payments crisis in 2012 private credit is starting to pick up.

The 0.5 percent inflation was seen in January 2004 as the country recovered from a balance of payments crisis in 2001 and credit was building up.

Within 12-months inflation hit 13.8 percent, as fiscal and monetary policy loosened following a change of government.

At the moment global inflationary conditions are also benign with the US ending its deadly 'quantity easing' and commodity prices also easing.

In 2004 however global commodity prices were rising with the Greenspan-Bernanke led Fed having fired the so-called 'mother of all liquidity' bubbles which ended in a global economic collapse in 2008.

(Corrected headline - Sri Lanka inflation hits 11-year low in February 2015)


 

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