Sri Lanka August inflation 0.9-pct

Aug 31, 2009 (LBO) – Consumer prices in Sri Lanka’s capital Colombo moved up 0.9 percent from a year earlier, compared with 1.1 percent in July, the government’s statistics office said. In the month of August, prices fell 0.3 percent. Un-adjusted inflation was 1.1 percent in July.

Prices adjusted for seasonal changes, which is a lagging indicator averaged over two years, fell to 8.5 percent in August from 10.4 percent in July.

Sri Lanka’s inflation has fallen steeply from a peak of 29.9 percent in April 2008, amid tight monetary policy by the Central Bank.

So far this year the Central Bank has avoided printing money for the government, which is the key cause of high inflation in Sri Lanka.

Sri Lanka’s private sector credit growth has been negative to June 2009 and inflation pressures muted.

So far this year, the Central Bank has been sterilizing inflows on a net basis. Past experience has shown that inflationary pressure would remain muted under such a trend.

In the past three weeks however T-bill yields have been suspiciously frozen. In the years past, such unnatural phenomena had pointed to Central Bank direct intervention in T-bill markets to print m