Sri Lanka ‘core inflation’ low as ‘headline’ prices hit record

April 01, 2008 (LBO) – Sri Lanka’s central bank says a ‘core’ inflation index from which a number of expenditure components have been dropped is low, after consumer prices in the capital Colombo hit a historic new record. Inflation measured by the New Colombo Consumer Price Index (CCPI-N) rose to a new record of 23.8 percent in March while an older index with more food in it showed an increase of 28.1 percent for March.

Core Problem

But the central bank says a ‘core’ inflation number is in single digits, and it was “successful” in containing underlying inflation.

“Accordingly, the core inflation calculated on the basis of New Colombo Consumer’s Price Index (CCPI(N)) shows an inflation of only 8 per cent on a point to point basis and annual average inflation of 7.5 per cent in 2007,” the Central Bank said in a statement.

“Accordingly, demand management polices of the Central Bank have been successful in containing the underlying inflation well below 10 per cent throughout the year. This trend has continued so far in 2008 as well.”

So-called ‘core inflation’ in many countries and especially in the United States, has come under strong fire from critics as having no connection to living human