Sri Lanka January inflation slows to 3.8-pct

Jan 31, 2012 (LBO) – Consumer prices in Sri Lanka’s capital rose 3.8 percent in January 2012 from a year earlier, slowing from 4.9 percent in December 2011, the state statistics office said. Prices measured by the Colombo Consumer Price Index rose 0.3 percent in January 2012 after rising 1.2 percent during December 2011.

Annual average inflation, which is an averaged over two years to remove seasonal variations and is a lagging indicator was 6.7 percent compared with 6.2 percent a month earlier.

Food without alcoholic beverages, fell 0.3 percent in January while non food items in the index rose 0.8 percent, the statistics office said.

Clothing and footware rose 0.5 percent and transport rose 2.0 percent.

Sri Lanka’s market interest rates have moved up over the last several months amid interventions in the forex markets by the Central Bank, making liquidity tight in money markets, without an intentional policy rate increase.

Sri Lanka’s inflation is externally anchored to the US dollar via a peg but it has come under pressure from high credit growth and liquidity injections.