January inflation slows to 3.8%

Sri Lanka’s January inflation slowed to 3.8 percent from a year and from 4.9 percent recorded in December 2011, the data released by the Census a n d S t a t i s t i c s De p a r t me n t said.

“This is the lowest inflation r at e re c o rd e d a f t e r t wentyfive months from December 2 0 0 9 . As a g ai nst t he hi gher base prevalence in January 2 0 1 1 , t h e Yo Y i n f l a t i o n i n January 2012 shows a significant decrease to 3.8 percent,” Statistics Department said.

The prices of all items of food and non food g roups me a s u r e d by t h e C o l o mbo Consumer Price Index (CCPI) increased 0.3 percent in January 2012, after rising 1.2 percent during December 2011.

The12 month moving avera g e i n f l a t i o n a s me a s u r e d by the CCPI in the month of January stood at 6.5 percent, representing a negative trend.

On a month-on-month basis, price increases were noticed in sub cate gories of clothing and footwear, housing, water, electricity, gas and other fuels, fur nishing, household equipment and routine household maintenance health, transport re c re at i o n a nd c ul t ure a nd education.

Howeve r c o mmuni c a t i o n cate gory re presented in the CCPI remained unchanged.

On a year-to-year basis, the hi g hest c o nt r i but i o n t o t he overal l i ncrease c a me f ro m non food commodities which i n c r e a s e d by 4 p e r c e n t i n January 2012.

Among the food commodities, rice, wheat flour and vegetables which have significant

weights in the CCPI basket recorded price increases on a year-to-year basis.

Under the non food category, the prices of kerosene oil, pet-

“This is the lowest inflation rate recorded after twenty-five months from December 2009. As against the higher base prevalence in January 2011, the YOY inflation in January 2012 shows a significant decrease to 3.8 percent”

rol, diesel and gas rose by 39 percent, 19 percent, 15 percent and 28 percent respectively.

Duri n g t h e e a rl y p a r t o f January, Central Bank said that in 2012 it mainly plans to keep inflation at a single digit level, around 5-6 percent.

“On our path, the Central Bank will be keen to accommodate the higher growth, but our priority will certainly be infla- tion,” Central Bank Gover nor Ajith Nivard Cabraal said.

Sri Lanka has kept its policy interest rates unchanged since February 2011 to spur growth.

However President Mahinda Rajapaksa during the budget speech in November 2011 making an unexpected move announced a devaluation of the LKR by 3 percent to boost exports.

Sri Lanka maintains a soft peg against the dollar, and follows a tight monetary policy in contrast to some of the countries in the Asia-pacific region.

Of late, Central Bank has been s everely c r i t i c i z e d for spending foreign reserves to kee p the LKR at the cur rent level. Inter national Monetary Fund (IMF) has halted the final two tranches amounting to US $800 million of the Standby Facility it approved, until the Central Bank ag rees further exchange rate flexibility.