Sri Lanka central bank promises single digit inflation in 2009

Jan 03, 2009 (LBO) – Sri Lanka's central bank has promised single digit inflation amid deflationary external conditions and the possibility of a looser stance and lower interest rates in 2009, in its annual road map for monetary policy. In the last few months inflation has been falling with the effects of external deflationary conditions flowing into the country through a soft-dollar peg.

Measured by the Colombo Consumer Price Index (CCPO) consumer prices fell to 14.4 percent in December from a peak of 28.2 percent in June.

"We expect this declining trend in inflation to continue in the period ahead, and for the inflation rate to reach a single digit level by mid 2009," Central Bank governor Nivard Cabraal said, unveiling the monetary policy road map for 2009.

"Accordingly, inflation would reach around 8.0 – 9.0 per cent by mid 2009 and will continue the moderated trend."

Inflation Target

The central bank is projecting base-case inflation of around 9.0 percent in 2009, best case inflation of around 5.0 percent and a worse case scenario of around 12 percent. In 2008 the central bank predicted inflation of around 10 to