Sri Lanka inflation accelerates to 7.0-pct in November

Nov 30, 2010 (LBO) – Sri Lanka’s inflation in November 2010 rose 7.0 percent from a year earlier up from 6.6 percent in October amid a pick-up in credit growth with prices rising 1.1 percent during the month. The clothing and footwear subcategory rose 1.7 percent in November and was up 9.4 percent from a year earlier.

The seasonally adjusted, moving average of the Colombo Consumer Price Index also rose to 5.8 percent from 5.4 percent a year earlier. But the moving average is a lagging indicator averaged over 24 months.

Sri Lanka’s central bank has kept inflation low by historical standards and inflation has been muted during the year with low credit growth despite some debt monetization and large transfers of central bank profits to the government during the year.

But in October credit growth picked up to 15.5 percent indicating that the monetary transmission mechanism is strengthening and requiring more vigilance from the Central Bank.

Meanwhile commodity prices have also picked up with Federal Reserve money printing. Sri Lanka has a peg with the US dollar and dollar inflation serves as a floor or ‘external anchor’ to the country’s inflation.

Sri Lanka’s statistics office data showed