Islandwide inflation increases to 8.4 pc

By Paneetha Ameresekere-2017-12-22

Islandwide inflation, as measured by the National Consumer Price Index (NCPI) increased to 8.4 per cent last month, faster than the more restricted Colombo Consumer Price Index (CCPI) which increased by a mere 7.6 per cent, an indication that islandwide inflation is far greater than Colombo centric inflation.

With 70 per cent of Sri Lanka's population living in rural areas, it is that segment of the population who are mostly affected by the rise in islandwide inflation......driven primarily by the sharp increases in coconut and rice prices due to the recent, prolonged drought which has affected three successive harvests recently, the last being this year's Yala season.

Meanwhile, the 12-month moving average of the NCPI also accelerated to 7.5 per cent last month, while the CCPI lagged behind at 6.4 per cent. One way of combating inflation is by increasing the interest rates and therewith the money circulation, in which instance, the people drawn by the greed to make deposits for higher returns, rather than continuing to be in circulation, will thereby drive up inflation by demand.

The Central Bank of Sri Lanka (CBSL) is set to announce their interest rate stance on 28 December. Currently, the CBSL's lending rate to banks is 8.75 per cent and its deposit rate is 7.25 per cent.