Inflation Brigade

The Central Bank plans to adopt Inflation Targeting during this year as a policy measure to control inflation, Governor A S Jayarwadene told Lanka Business Online today. rn

rnInflation Targeting is a method adopted by some Central Banks in the developed countries, to effectively control long run inflation by publicly announcing inflation targets and monetary policy measures adopted to achieve them.

rnrnMany economists regard Inflation Targeting as an effective policy to curb high inflation, due to its ability to suppress inflationary expectations in the economy when the Central Bank publicly commits itself to maintain inflation at the targetted level.

rnrnAs an initial step, the Central Bank is testing different measures of inflation to choose an index, which would reflect countrywide inflation most accurately.

rnrnldblquote The CCPI currently used, is based on urban household expenditure and it ends to overstate national inflation. For Inflation Targeting we are most likely to use the new index devel