Feb 29, 2008 (LBO) – Consumer prices in Sri Lanka’s capital Colombo rose 21.6 percent in the 12-months to February from 20.8 percent, with the index gaining 2.8 percent in the past month, while an older index showed a 0.7 percent increase. In the first half of 2007 the monetary authority was successful in combating inflation, but the process unraveled after April 2007, when it loosened monetary policy and went on a money printing binge, driving inflation up and putting pressure on the currency.
Sri Lanka’s central bank blamed ‘supply side’ factors for inflation that jumped from 13 percent to 20 percent levels through the second half of 2007.
But the International Monetary Fund said the central bank had ‘paused’ its tight monetary policy stance mid-way in 2007.
Updated The new Colombo Consumer Price Index (CCPI-N) gain of 2.8 percent in February was down slightly from 3.0 percent in January.
But the 12-month increase in the older Colombo Consumer Price Index (CCPI) was higher at 24 percent with the series having a pronounced ‘base-effect’ as it had fallen in absolute terms in the first quarter of 2007, amid exceptionally tight monetary policy.
In February 2007 the index fell 1.3 percent in absolute terms.