Mar 30, 2012 (LBO) – Inflation in Sri Lanka’s capital Colombo accelerated to 5.5 percent in the 12 months to March 2012 up from 2.7 percent in February with the index growing 2.2 percent in the month, statistics office data showed. Food prices remained stable with the foods index growing just 0.1 percent after falling 1.3 percent a month earlier.
Non-food items rose 4.0 percent, with clothing and footwear rising 1.3 percent, housing gas and fuels rising 4.3 percent and transport rising 9.6 percent.
Sri Lanka’s rupee fell sharply in March after several months of money printing by the Central Bank to offset liquidity shortages caused by interventions in the forex market.
A weakening of the currency may not be fully reflected in an inflation index, due to presence of some non-traded items, which no not quickly respond to currency depreciation.
Even rice produced in Sri Lanka cannot be exported due poor quality and no track record, and behaves more like a non-traded good, and price do not rise quickly with a depreciating currency, unlike other surplus traded produce like tea.
In February fuel and power prices were raised. Raising fuel prices kills demand in the economy, which can put downward pressure on ot