Bloomberg News

Sri Lankan Inflation Slows, Boosting Scope to Shield Growth

September 30, 2011

(Updates with economist’s comment in fourth paragraph.)

Sept. 30 (Bloomberg) -- Sri Lankan inflation slowed in September to a one-year low, boosting scope to leave interest rates unchanged and shield growth as the global recovery weakens.

Consumer prices in the capital, Colombo, increased 6.4 percent from a year earlier after gaining 7 percent in August, the Department of Census and Statistics said on its website today. The median of five estimates in a Bloomberg News survey was for a 6.4 percent advance.

The data signal more room for central bank Governor Ajith Nivard Cabraal to leave borrowing costs unchanged for a ninth month at the policy decision due Oct. 10. Higher food supplies, and a 0.7 percent rise in Sri Lanka’s rupee against the U.S. dollar in 2011, have helped curb price gains.

“With headline inflation falling, the central bank keen to support growth and concerns about the outlook for the global economy increasing, we think that interest rates will be kept on hold until the end of this year,” Gareth Leather, an economist at Capital Economics Ltd. in London, said before the release.

The Sri Lankan rupee fell 0.2 percent to 110.17 per dollar as of 3:22 p.m. local time, according to data compiled by Bloomberg. The benchmark Colombo All-Share Index of stocks closed up 0.5 percent today.

Cabraal joined officials in Asian economies from Malaysia to Taiwan in leaving rates unchanged this month, as Europe’s debt crisis and a struggling U.S. recovery cloud the outlook for exports. Sri Lanka’s monetary policy stance is “appropriate” to support growth and inflationary pressures in the country are contained, the International Monetary Fund said Sept. 7.

The government is aiming for 8.5 percent expansion this year as the $50 billion economy revives following the end of a civil war in 2009.

Growth accelerated to 8.2 percent in the three months through June from a year earlier, compared with a 7.9 percent pace in the first quarter. Farming output rose 1.9 percent in the second quarter from a year earlier.

--With assistance from Manish Modi in New Delhi. Editors: Sunil Jagtiani, Shamim Adam


To contact the reporter on this story: Anusha Ondaatjie in Colombo at

To contact the editor responsible for this story: Hari Govind at

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