ECONOMYNEXT – Sri Lanka’s inflation in the 12-months to November 2017 was 7.6 percent, with consumer prices rising 1.2 percent in the month, the third straight month, the index has risen, official data shows.
The Colombo Consumer Price Index grew from 120.8 points to 122.2 points in the month of December, the state statistics office said.
Sri Lanka’s central bank generated balance of payments crisis and currency collapse, in 2015/2016 by printing money to cut rates while the state budget deficit expanded and private credit picked up.
Since 2016, rates have gone up, it is no longer printing money and credit has eased, but it is following a controversial policy of targeting a real effective exchange rate index (REER), involving further weakening of the currency and generating more inflation down the line.
Before moving to the REER targeting policy, the central bank was targeting monetary aggregates while targeting a soft-exchange rate peg.
Sri Lanka has promised to move into a ‘flexible inflation targeting’ regime. (Colombo/Nov30/2017)