ECONOMYNEXT – Sri Lanka’s inflation accelerated to 9.9 percent in the 12-months to November from 7.6 percent in October, in the wake of record money printing for over two years, while policy in reserve currency central banks also deteriorated.
The Colombo Consumer Price Index jumped 2.6 percent in the 30-day of November. Food prices jumped 5.3 percent in the month, driven by rice and vegetables.
Vegetable prices rose to unusual levels in November amid rains. But non-foods jumped 1.2 percent after jumping 1.5 percent a month earlier.
The 12-month inflation is the highest recorded since January 2009 when the index showed a 10.4 percent after a base change.
Sri Lanka has recorded 9.8 percent inflation in January and February 2013 when the credit system was recovering from a 2011/12 currency crisis.
Food prices rose 17.5 percent during the past 12 months, partly driven by unusually high vegetables.
Rice prices are kept up with import controls after printing money.
Over two years food prices had risen 29.5 percent.
Since August 2019 when the central bank ended prudent policy and began the current bout of inflationary policy by purchasing bonds to inject money, food prices have risen 34 percent. Headline inflation, made up by adding more services and other items which grows more slowly is up 15.9 percent.
Sri Lanka’s central bank has promised to only create inflation of 4-6 percent a year. However since aggressive call money rate targeting with excess liquidity began Sri Lanka has been experiencing currency crises every 2 to 3 years.
Sri Lanka stocks hit a new record on Tuesday rising 2.13 percent.
From July 2019 to September 2021, the central bank has printed 1.48 trillion rupees. Foreign reserves have fallen from
Global monetary policy has also deteriorated coming from the US Fed and other reserve currencies. Post World War II money printing central banks have earlier blamed inflation on wage-spiral inflation, the oil shock and overheating.
The current excuses to keep printing money are “supply chain disruption” and “transitory inflation”.
Under fire from senators during a congressional hearing on November 30, Powell admitted that inflation had been above the Feds target of 2.0 “long enough” and it was time the “retire” the term “transitory”.
Senators pointed out that Powell’s actions were making house un-affordable even as he bought mortgage bond and prices were rising for the people. (Colombo/Nov30/2021)