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Sri Lanka inflation at 6.0-pct in May, but prices up in month

ECONOMYNEXT – Sri Lanka’s 12-month inflation dropped to 6.0 percent in May 2016, from 6.9 percent in April, but prices climbed 0.9 percent in the month, data from the state statistics office showed.

In May 2016, consumer prices rose 1.8 percent one of the highest spikes in prices seen in a single moth in recent years.

Sri Lanka’s inflation spiked to 7.3 percent in March, as the country’s central bank failed to keep stable prices.

But in the past central bank’s failures have been even worse. Sri Lanka’s central bank is unable to keep control inflation as it prints money to maintain a policy rate and also buys dollars, further depreciating the currency and generating liquidity.

Analysts have called for central bank reform or abolition of the agency to keep inflation down and avoid balance of payments crises. The central bank is trying to move to a modified inflation targeting framework in the future.

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