Sri Lanka’s inflation accelerates to 6.0-pct in August

ECONOMYNEXT – Inflation in Sri Lanka’s capital accelerated to 6.0 percent in the 12-months ending August 2017 from 4.8 percent in July, mostly on a base effect, while prices fell absolutely during the month, data from the state statistics office showed.

During the month of July, the Colombo Consumer Price Index fell 0.5 percent to 118.8 points from 119.4 with food and non-alcoholic beverages falling 2.5 percent. The prices of fish and rice fell, the statistics office said.

Non-foods rose 0.5 percent during the month.

Sri Lanka’s inflation measured by the CCPI peaked at 7.3 percent in March 2017 following money printing and a currency collapsed by the central bank and has since started to fall, after interest rates were raised and money printing ended. The spike in August comes with sharp fall in the index last year in August

The central bank is now buying dollars and withdrawing cash from money markets, and credit is no longer driven by printed money.

However the central bank can still alter the price structure of the economy by deliberately weakening the currency.

Inflation measured by the National Consumer Price Index peaked at 8.6 percent in March 2017. The CCPI was revised in 2015 to reflect ‘international best practices’. Internationally, many index revisions and frequent base changes are used to understate inflation or smoothen volatility.

In August the independent CAL Urban Price Index showed inflation rising to 7.7 percent, after falling in the previous two months.  The CAL Urban Price Index has tended to show lower inflation than the CCPI during the past year. (Colombo/Aug31/2017)

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