Sri Lanka seeks to change inflation index as price pressure grows

Jan 06, 2011 (LBO) - Sri Lanka wants to change a price index again to reflect recent changes in consumption patterns although previous tinkering with the indicator at a time inflation hit record highs drew criticism.

It would also cover changes in credit growth, money market liquidity and its control measures, impact of capital inflows and their impact on the exchange rates and money markets and savings and investment patterns.

Central bank governor Nivard Cabraal said inflation had been brought down sharply and would be maintained around the mid-single digit levels and that a new index was being considered.

Among key developments expected in 2011 would be a "more representative price index that reflects most recent changes in consumption patterns," Cabraal said in a speech on the regulator's monetary policy road map for this year.
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He said they needed a "more realistic index to assess current inflationary pressures as well as inflationary outlook.

There was a need to rebase Sri Lanka's Colombo Consumer Price Index (CCPI) every five years as consumption patterns change rapidly, Cabraal said.

"Inflation remained subdued last year at an annual average of 5.9 percent. Two years of mid-single digits wa