Sri Lanka to have single digit inflation in 1Q09: CB Governor

Feb 02, 2009 (LBO) – Sri Lanka is expecting single digit inflation in the first quarter of 2009, and further falls in interest rates, Central Bank Governor Nivard Cabraal said, less than a year after the island recorded its highest inflation of close to 30 percent. The Colombo Consumer Price Index (CCPI), whose weights were revised after its 12-month increase rocketed to 29.9 percent in April 2008, fell to 10.7 percent in January 2009.

"According to our estimates inflation will move to single digits in the first quarter," Governor Nivard Cabraal told reporters Friday.

"We have maintained very tight monetary policy. This year we have loosened policy to some extent."

Deputy Governor W A Wijewardene says year-end inflation is likely to be 9.10 percent. Governor Cabraal says interest rates would also decline.

"Treasury bills interest rates have come down, prime rates have come down," Cabraal said.

"And we have seen a very clear interest rate reduction during the first four weeks of 2009 and we expect that to continue in tandem with the decrease in inflation."

Treasury bills and bond rates have come down by about 200 basis points in January, partly as a result of a cut in the bank's discount (reverse repo) window from 19.0 to 17.0 perc