Jan 03, 2013 (LBO) – Sri Lanka’s Central Bank aims to inflate the economy by about 7.0 percent in 2012 based on a monetary targeting framework where money supply and credit growth is taken into account. Delivering a monetary policy roadmap for 2013 Governor Nivard Cabraal said the Central Bank was will continue to aim for mid single digits inflation over the medium term.
In 2012 the central bank’s record of generating mid single digits inflation was thrown off track after tens of billions of rupees liquidity was injected into the banking system triggering a balance of payments crisis ending the year with 9.2 percent consumer inflation.
Under indicative targets unveiled on January 02, the Central Bank is aiming at inflation of 7.0 percent in 2013, moving down to 5.0 percent in 2015 measured by the gross domestic product deflator.
The GDP deflator, though confined to a calendar year, is calculated on a complex method compared to a price index and is available less frequently and with a greater lag and is therefore less transparent to those affected by the inflation that is generated by a central bank.
Central banks that are successful in generating low levels of inflation target a more