Sri Lanka inflation accelerates to 7.8-pct in February 2011

Feb 28, 2011 (LBO) – Consumer prices in Sri Lanka’s capital Colombo accelerated to 7.8 percent in the 12-months to February from a year earlier, up from 6.9 percent in January the government’s statistics office said. Prices rose 1.2 percent in the month of February alone continuing a trend seen in September. In September prices rose 1.0 percent, in October 1.2 percent, in November 1.1 percent in December 1.1 percent and in January 1.2 percent.

Authorities have blamed rising food prices on ‘supply shocks’ related to recent floods. The Colombo Consumer Price Index’s food category (which controversially drops alcoholic items) rose 2.1 percent in February.

But the food sub-index also rose 2.1 percent in January, December, November and 2.2 percent in October. The food category rose 13 percent in the 12-months to September.

Global food prices have been rising amid loose US monetary policy. Sri Lanka’s raw coconut prices for example shot up last year as world palm oil prices rose. Sri Lanka’s price increases are amplified due to protectionism.

Sri Lanka’s has a peg with the US dollar and excess liquidity in money markets are at historically high levels. The International Monetary Fund said last mont