Sri Lanka inflation 2.1-pct in December 2014

EconomyNext – Consumer prices in the Sri Lankan capital Colombo picked up by 2.1 percent in December from a year ago after gaining 1.5 percent in November, the Central Bank said.

It was the first gain in the year-on-year index since July this year although December’s inflation was lower than the 4.7 percent in the same month in 2013.

The island ended the year with annual average inflation of 3.3 percent, down from 6.9 percent in 2013, a statement said.

"Annual average inflation which followed a declining trend for nineteen consecutive months reached 3.3 percent in December 2014 from 6.9 percent in December 2013," the Central Bank said.

"This is, by far the longest period that both year-on-year inflation (71 months) and annual average inflation (65 months) have continuously remained at single digit levels, after the economy was liberalized."

The central bank attributed low inflation to "prudent monetary management, relatively stable exchange rate, moderation in prices of both food and non-food imported items, supply side improvements, downward revisions in administered prices of electricity and water tariffs, LP Gas and fuel and timely fiscal policy measures introduced to contain supply side disturbances in harmony with monetary policy measures."

The contribution to the decline in annual average inflation to 3.3 percent in 2014 came mainly from slowdown in the price increase in the Non-food category, which grew only by 2.8 percent in 2014 against that of 6.1 percent in 2013.

This was supported by the downward revision of electricity and water tariffs and fuel prices in the latter months of 2014. 

But the central bank said relatively high increase in the Food and non-alcoholic beverages sub-category by 3.8 percent in 2014 compared to 2013 exerted an upward pressure on inflation.

Core inflation, which captures underlying long-term trend of inflation, decreased from 4.4 percent in December 2013 to 3.5 percent in December 2014 on an annual average basis.