Inflation in Sri Lanka stabilizes in March amidst moves to change index

March 30, 2007 (LBO) – Consumer price inflation in Sri Lanka's capital Colombo fell by 1.7 percent in the month of March though the 12-month difference in price levels was still high at 19.5 percent, data from the statistics office showed Friday. Analysts says unions are likely to oppose any attempts to short change them on their cost of living allowances by using different index.

Updated The 12-month inflation number is slightly higher than the 19.2 percent recorded in February but is lower than the January high of 20.5 percent.

From December the Central Bank has tightened monetary policy to contain money supply and liquidity in the banking system, though data in its annual report showed that the bank had printed 38.5 billion rupees in 2006 to finance the budget deficit.

Central Bank Governor Nivard Cabraal said Friday the bank would continue its tight monetary policy and meet its pre-announced reserve money targets.

Statistical Effect

In February inflation fell by 1.3 percent. Analysts say historically inflation tends to fall in March and also in February.

The index is now at 5029.6, lower than the 5,184 in January.

But the moving average of the index, which lags the point to point, continued