Saturday, August 1, 2009

Sri Lanka’s Inflation Held Near Five-Year Low in July

By Anusha Ondaatjie

July 31 (Bloomberg) -- Sri Lanka’s inflation held near a five-year low in July, giving the central bank more room to cut interest rates.

Consumer prices in the capital, Colombo, rose 1.1 percent from a year earlier after gaining 0.9 percent in June, the statistics agency said on its Web site today.

The Central Bank of Sri Lanka on July 13 kept interest rates unchanged, waiting to see if three reductions in borrowing costs this year are enough to stoke an economic revival after the end of almost three decades of civil war. The bank this month raised its 2009 growth forecast to as much as 4.5 percent from an earlier estimate of 2.5 percent.

“Commodity prices are unlikely to offer the same cushion they provided to consumer prices at the onset of the global slowdown,” said Shivantha Meepage, senior analyst at Acuity Stockbrokers Pvt. in Colombo. “The expected economic recovery following the end of the war and the lag effect of the central bank’s relaxed monetary stance would also create demand-side pressures towards the latter part of this year.”
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