Sri Lanka inflation accelerate to 6.5-pct in Jan

Jan 28, 2010 (LBO) – Inflation in Sri Lanka’s capital Colombo accelerated to 6.5 percent in January 2010 from a year earlier, up from 4.8 percent December while prices increased 1.4 percent during the month, the government’s statistics office said. Sri Lanka’s Colombo consumer price index (CCPI) has been rising steadily after April 2009 when prices stopped falling. From May 2009 to January 2010 the index climbed from 201 points to 216.4 points, which is an increase of 7.6 percent.

The seasonal average of the index, which is a lagging indicator over two years fell to 3.1 percent in January from 3.1 percent in December.

Sri Lanka’s central bank has been withdrawing liquidity from the market from the second half of 2009 but high levels of liquidity running into 20 to 30 billion rupees a day has remained in the market.

Analysts say the Central Bank should tighten monetary policy and stop intervening in the primary market for government Treasury bills, which is similar to ‘quantity easing’.

On Tuesday the Central Bank, which runs the government’s debt office said it had only 8.2 billion rupees out of 11.0 billion rupees of maturing Treasury bills to market participants. The central bank can ‘print’ money by buying bills in the primar