Sri Lanka anchor currency inflation -1.4-pct in June

July 15, 2009 (LBO) – Inflation of Sri Lanka’s anchor currency, the US dollar, measured by the all urban consumer (CPI-U) index fell 1.4 percent in June from a year earlier, the Bureau of Labour Statistics said. In the month of June, inflation of the Sri Lanka rupee measured by the Colombo Consumer Price Index rose 0.9 percent from a year earlier.

In the month of June alone, the index rose 0.9 percent. The increase came largely from the gasoline index which rose 17.3 percent, the BLS said. Over the past year the energy index has fallen 25.5 percent.

Sri Lanka maintains an unstable ‘soft’ peg with the US dollar at 114.90 importing US generated inflation to the country.

But the country has a discount window and its central banking law has provisions to print money to finance budget gaps, leading to higher inflation than the US and frequent breaks of the peg.

The rupee was pegged at 108.00 to the US dollar in June.