Jan 31, 2014 (LBO) – Sri Lanka’s consumer prices rose 4.4 percent in the 12-months to January 2014, down from 4.7 percent in December, the state statistics office said. But external inflation usually generated by reserve currency central banks like the Federal Reserve has also started to moderate and if Fed tightens or normalizes monetary policy, an appreciating dollar can help reduce prices.
But the Colombo Consumer Price index rose 0.6 percent to 177.5 points in the month with transport and communications costs rising though the food index fell 0.9 percent.
Sri Lanka’s inflation has been moderate with a stable exchange rate and weak bank loan growth after a credit bubble burst in 2011 and 2012 in a balance of payments crisis.
Analysts say inflation would have been lower if the Central Bank had allowed the rupee to appreciate in the wake of weak credit growth after the credit bubble burst.