Sri Lanka inflation gap widens with dollar-pegged Asia

Apr 02, 2011 (LBO) – Sri Lanka’s inflation has started to pull ahead of dollar pegged Asia with consumer prices in March rising 8.6 percent from a year earlier, despite a fall in food prices as non-food prices inflated. In the month of March the food portion of Sri Lanka’s Colombo Consumers’ Price index fell 1.2 percent, after rising steadily more than 2.0 percent every month since October.

Coconuts

The Central Bank expects annual inflation to ease off after April with vegetable prices expected fall as production recovers from a floods earlier in the year.

The central bank said most vegetables, rice, fish and coconuts had been falling over the month of March.

Though the food index fell 1.2 percent, non-food items which include services rose 0.7 percent in March, building on a 0.3 percent rise in February, moderating the total index fall to 0.3 percent in the month.

After May Sri Lanka is expected to change its inflation index. It is now standard practice around the world to change indices to understate inflation.

Sri Lanka’s rupee is pegged to the US dollar which acts as a de facto external anchor for inflation and the monetary authority has limited ability to target inflation inde