January 31 (LBO) – Consumer inflation in Sri Lanka’s capital Colombo soared to a new record of 20.5 percent in the year to January, beating the 19.8 percent high reached in November, a report from the government’s statistics office showed Wednesday. This is the highest inflation seen in Sri Lanka for more than a decade.
Sri Lanka’s inflation started to rise from last March after the government started to print money to finance worsening cash deficit.
In late 2006, the Central Bank started tightening monetary policy.
At the January monetary policy meeting, the Central Bank did not raise interest rates, but later squeezed a liquidity window to the banking system and also reduced central bank credit to government.
Central Bank Governor Nivard Cabraal has announced tight money supply targets that limits central bank credit (printed money) to government to only 12 billion rupees in 2007.
The Central Bank has warned that inflation is likely to move up till the end of the first quarter before moderating.
In January alone prices went up by 1.5 percent, measured by the Colombo Consumer Price Index.
In the year to December inflation was 19.3 percent.
The 12-month moving average of the index moved up to 14.8 percent u