Sri Lanka June inflation at 0.9-pct

June 30, 2009 (LBO) – Consumer prices in Sri Lanka's capital Colombo rose 0.9 percent in June from a year earlier, down from 3.3 in May, while prices during the month moved up 1.3 percent, the government's statistics office said.

So far this year Sri Lanka's central bank has technically 'loosened' monetary policy, cutting policy rates by 800 basis points.

But a process of 'quantity tightening' is underway as the monetary authority sells down domestic assets to lock up foreign reserves.

Updated The Colombo Consumer Price Index moved up to 207.8 point in June from 205.8 percent in May.

The seasonally adjusted average, which is a lagging number moved down to 12.5 percent to 14.7 percent, the Department of Census and Statistics said.

The consumer inflation is the lowest since February 2004, when prices also rose 0.9 percent over the previous 12-months. Fiscal and monetary policy then reversed plunging the country into high inflation.

June inflation showed up most in the food price sub-group where the index moved up to 223.2 points from 217.7 percent.

Sri Lanka's inflation has been falling steeply since October 2008, on tight monetary policy by the Central Bank allowing the country to benefit