Sri Lanka inflation eases in December

Dec 31, 2007 (LBO) – Sri Lanka’s consumer prices in the capital Colombo eased in December with the most widely watched index falling 0.4 percent in the month, lowering 12-month inflation to 16.4 percent from a peak of 19.6 percent a month before. The Colombo Consumer Price Index fell 21.3 points in the month to 5954.9, the central bank said.

Meanwhile, a new index released last month showed that prices rose 1.0 percent and 12-month inflation fell to 18.8 percent from 19.3 percent a month before.

The CCPI(N) index has a lower weighting on food and analysts have said that it may be less responsive to monetary policy action.

The index also shows smoother movements than the existing CCPI index.

Sri Lanka has tightened monetary policy since November and has avoided printing money as far as possible sending government securities yields above 20 percent.

The negative inflation shown in December bucked a traditional trend that always sees high inflation in the month.

But the statistic office which compiles inflation data claimed that food price falls were due to better “supply of consumer goods” especially vegetables to the main markets in Colombo.

The statistics office always blames supply factors for inflation an