Sri Lanka central bank says inflation will fall till November

Oct 20, 2008 (LBO) – Sri Lanka’s central bank says consumer inflation, which fell to 24.3 percent in September, will continue to fall till November in the light of tight policy in 2008 and falling global commodity prices. Central Bank governor Nivard Cabraal told LBO earlier this month that he expected inflation to be slightly below 20 percent by December.

Price Pressures

Inflation measured by a revised Colombo Consumer Price Index (CCPI) has fallen from a peak of 28.2 percent in June 2008.

“This deceleration was facilitated by a slowing down of credit extended by commercial banks to the private sector as well as public corporations,” the central bank said in its monthly monetary policy statement for October.

“The outcome of these developments would be evident in the forthcoming months through a further deceleration in inflation.

“This declining trend is expected to continue into November.”

Historically prices have spiked in December. In the last quarter of the year the government also usually runs into a fiscal crunch, resulting in increased central bank financing of the deficit.

The central bank says improving agricultural supplies would also help keep prices down.