ECONOMYNEXT – Sri Lanka’s inflation in the capital Colombo eased to 66 percent in the 12-months to October 2022, from 69.8 percent in September with food prices falling 2.0 percent in the month, data from the state statistics office showed.
The widely watched Colombo Consumer Price Index fell 0.4 percent absolutely to 243.8 points during the month of October.
The food price index was up 85.6 percent in the 12-months to October with the index falling 2.0 percent.
Non-food sub-index grew 0.7 percent to 215.1 percent.
Sri Lanka’s central bank has allowed market rates to go up to 30 percent and private credit is now negative, reducing the ability of the agency to create inflation.
Several banks are putting money back in the central bank with around 340 billion rupees deposited at its overnight windown without lending to customers or government, in one of the most prominent instances private sector sterilization seen in Sri Lanka.
The exchange rate has also been pegged at around 360 to the US dollar after hiking rate, without a formal float to restore confidence.
However non-traded items including services tend to go up for a time as the economies relative prices adjusts to the currency fall. A clean float and a appreciation of the currency can reverse or reduce the trend.
Sri Lanka’s inflation shot up after two years of money printing and a float botched with a surrender requirement in cascading policy errors that led to the worst currency crisis in the history of the central bank.
Sri Lanka follows a highly discretionary monetary regime called flexible inflation targeting, probably the most deadly anchor-conflicting (imppossible trinity) policy framework ever cooked up by Washington-based Mercantilists and peddled to third world nations without a strong doctrinal foundation in sound money or classical economics.
Traded goods prices are also easing with the US Fed tightening monetary policy to break the worst commodity bubble in fired since the Greenspan-Bernanke bubble that ended in the Great Recession in 2008. (Colombo/Oct31/2022)