Sri Lanka’s national inflation at 7.9-pct in August

ECONOMYNEXT – Sri Lanka’s nation-wide inflation rose to 7.9 percent in the 12-months to August up from 6.3 percent in July, the state statistics office said, though absolute prices fell in the month.

The National Consumer Price Index fell to 122.3 points in August from 122.4 points in July indicating that prices fell in the month.

The 12-month inflation however rose due to the so-called ‘base effect’ as the index fell 1.6 percent in August.

The National Consumer Price Index has fallen for two straight months.

Sri Lanka’s central bank cut interest rates in 2015 as private and state credit demand rose, printing tens of billions of rupees, panicking foreign investors in bonds and driving credit to unsustainable levels.

The rupee collapsed from 131 to 151 to the US dollar and the central bank belatedly tightened policy. Fiscal policy has also since tightened with higher taxes and a wage freeze for two years.

The exchange rate has stabilized and the central bank is now selling down its bill stock and mopping up liquidity generated from dollar purchases. (Colombo/Sept21/2017)

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