Inflation drops further, says CBSL [November 15 2008]

The Central Bank of Sri Lanka today said the inflation, as measured by the year-on-year change in the Colombo Consumer's Price Index, has declined to 20.2 percent in October, from a 24.3 percent in September. Inflation index has declined steadily from a peak of 28.2 percent in June 2008. CB attributes the decline to its continuing tight monetary policies and to improvements on the supply side.

The Bank expects the declining trend to continue as the commodity prices including the fuel prices fall due to the global financial crisis. "Benefiting from the downturn in international prices, the domestic fuel prices have also been revised downwards and the spillover effects of this move are expected to further ease inflation in the coming months, " the Bank said in its review. CB said the domestic foreign exchange market has been under some pressure as some foreign investments in Treasury bills/bonds have been withdrawn as a consequence of the global financial turmoil. However, due to the orderly management of this process, the domestic interest rates or the exchange rate were not destabilized materially, it said.