Sri Lanka says July reserve money target met, but inflation up

August 03, 2007 (LBO) – Sri Lanka’s central bank said its target for July reserve money was met with billions of rupees to spare and most of the inflation recorded in the month was due to administered price revisions.

“Consequently, the annual average rate of the CCPI also moved upto 17.2 per cent in July from 17.0 per cent recorded in the previous month.”

The July reserve money target was 253.8 million dollars but the actual recorded was 247.2 billion rupees.

“The achievement of reserve money targets will lead to deceleration of the growth in broad money supply and thereby containing demand driven inflation in the future,” the bank said.

“Though the administered prices led to an increase in inflation, the demand driven inflation is kept at bay through the continuing tight monetary policy.”

However other analysts have warned that demand pressure has been re-ignited and the reserve money targets were being reached due to an emerging balance of payments problem indicative of a loosening of monetary policy of late.

Central Bank said about 2.1 percent of the 2.8 percent increase in consumer prices in July was caused by administered price increases.

“The decelerating trend of the gener