Sri Lanka inflation jumps in October to 19.6 %

Oct 31, 2007 (LBO) – Sri Lanka's inflation rocketed 3.8 percent in October driving consumer prices in the capital Colombo during the past 12-months to 19.6 percent, the government's statistics office said. At the beginning of the year, the central bank promised to limit inflation to only 10 percent a year, but later admitted it would destroy the purchasing power of the currency by a higher percentage in 2007.

This has prompted calls for a formal inflation targeting law to be enacted in Sri Lanka forcing the central bank to preserve the value of the currency.

Sri Lanka has lopsided interest rates, with policy rates at 12.00 percent.

While inflation continues to be high, 3-month t-bill yields fell 143 basis today.

Updated

The moving average of the Colombo price index which is an average over a 24-month period, hit a new high of 17.7 percent.

The statistics office said the Colombo Consumer Price Index (CCPI) grew 209.2 index points to 5,723.0 points with food prices, especially milk prices going up the fastest.

Wheat and milk food prices have also gone up in response to rising import prices.

Sri Lanka had been printing money heavily since May as the budget defi