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Sri Lanka’s central bank may have little choice but to do nothing on monetary policy in the next few months even as the economy, still reeling from last year’s tsunami and political turmoil, seeks a boost from lower interest rates. Sri Lanka’s central bank may have little choice but to do nothing on monetary policy in the next few months even as the economy, still reeling from last year’s tsunami and political turmoil, seeks a boost from lower interest rates. The monetary authorities may be keen to ease policy to spur domestic demand but it won’t be able to do so as long as inflation continues to run at double digits.

Record-high global oil prices and heavy government spending on subsidies and welfare measures for the poor propelled the consumer price index to a high of 15.9% in February.

The nominal year-on-year inflation rate has come off slightly – it stood at 11.8% in May and is expected at around 10.0% by the end of the year – but measured on a 12-month moving average basis, inflation continues to accelerate. The 12-month moving average inflation rate was at 12.4% in May, higher than April’s 11.9%.

A central bank monetary board member has said that a rate hike this month is unlikely, being too soon