01st June 2010, www.island.lk, By Devan Daniel
The general level of prices increased 1.6 percent in May while the rate at which prices increase, or inflation, declined further to 5.3 percent during the month of May after reaching 6.9 percent in February, data from the Department of Census and Statistics showed.
The Colombo Consumers’ Price Index, the official inflation index in Sri Lanka, gained 1.6 percent to 215.9 points in May from 212.6 points the previous month. The annual average rate of inflation however continued to move upwards, reaching 3.6 percent.
A senior official of the Department of Census and Statistics said overall prices of goods represented in the CCPI increased 1.6 percent from April to May due to price increases of gas, flour, vegetables and fish.
"The heavy rains we experienced during the last weeks of May resulted in price increases for vegetables and fish," he said.
The Monetary Board of the Central Bank decided to hold policy rates steady at 7.50 percent and 9.75 percent for commercial bank overnight deposits and borrowings respectively with the Central Bank.
With inflation expected to be benign over the coming months, the Central Bank said there was still room for commercial banks to reduce their lending rates further and increase their lending in a bid to stimulate economic growth.
The credit stock to the private sector increased a marginal 0.1 percent in March to Rs. 1,235.4 billion from Rs. 1,234 billion in March 2009. Credit from the domestic banking sector increased 0.5 percent to Rs. 1,084.3 billion. Foreign sources accounted for credit amounting to Rs. 150.8 billion, a 2.4 percent decline from the previous year.
Net credit to the government declined by 6.9 percent to Rs. 655.2 billion from Rs. 704 billion a year ago. Credit to corporations increased by 84 percent to 96.9 billion from Rs. 52.6 billion.
However, analysts are worried that government borrowings could lead to inflationary pressure.
Public debt which was 86.2 percent of GDP in 2009, from 81.4 percent in 2008, has already expanded by 2.5 percent during the first two months of this year.
Dealers said rupee liquidity in the domestic market was still high at around Rs. 24 billion, and with relative quiet, the dollar was trading at around 113.80/85 yesterday.
With high levels of excess liquidity in the market, commercial bank appetite for government securities has not subsided.
At last week’s primary market auction to re-issue maturing Treasury bills amounting to Rs. 13 billion, bids came in for Rs. 18.3 billion. However, the Public Debt Department of the Central Bank accepted only Rs. 6.4 billion, rejecting the rest in a bid to control rates.
Rs. 6.5 billion was pumped into the system as the Public Debt Department paid off the maturing bills, for which re-issue bids had been rejected. Analysts said this was done by printing new money to this value, but the Central Bank said it has excess funds for this purpose.
If commercial bank confidence improves and more lending takes place, such liquidity injections could lead to inflation as consumption picks up.
Longer-term Treasury bill rates increased marginally last week.
The three-month Treasury bill rate fell marginally to 8.10 percent at last week’s auction from 8.13 percent a week ago. Rates on the six-month and 12-month bills increased marginally to 8.91 percent and 9.26 percent respectively from 8.88 percent and 9.23 percent a week before.
Showing posts with label CCPI. Show all posts
Showing posts with label CCPI. Show all posts
01 June 2010
24 April 2010
Sri Lanka's Inflation Down 6.3pct in March
24th April 2010, www.dailynews.lk
April Monetary Policy Review
Inflation, as measure
d by the year on year change in the Colombo Consumers' Price Index has declined to 6.3 percent in March.
The annual average inflation increased marginally to 3.2 per cent compared to the previous month.
The decline in year on year inflation is largely attributable to the reduction in the price of several key food items. The continued improvement in supply conditions is expected to subdue inflationary pressures, the Central Bank said.
The Monetary Board, at its meeting held on April 21, has decided to maintain policy interest rates of the Central Bank unchanged.
The expansion in monetary aggregates has begun to decelerate. Growth in broad money supply, which picked up towards end 2009, has declined to 17.4 per cent by February 2010.
The declining trend in credit to the private sector bottomed out in October 2009 and has since been growing in absolute terms, reflecting the gradual recovery in economic activity. This has been aided by the recovery in the global economy, the easing of the monetary policy stance as well as increased investor confidence.
Growth in the domestic economy is expected to gain momentum during the year, supported by these favourable conditions.
Reserve money has been expanding at a higher rate since the last quarter of 2009. The expansion has been mainly due to the increase in currency in circulation on account of the two elections held during the early part of 2010 coupled with the seasonal demand for currency.
The Bank is also monitoring the developments in the money market as excess rupee liquidity continues to remain high.
However, reserve money has begun to contract following the festive period. The Bank will continue to closely monitor the movements in monetary aggregates and take appropriate action if necessary.
April Monetary Policy Review
Inflation, as measure
d by the year on year change in the Colombo Consumers' Price Index has declined to 6.3 percent in March.The annual average inflation increased marginally to 3.2 per cent compared to the previous month.
The decline in year on year inflation is largely attributable to the reduction in the price of several key food items. The continued improvement in supply conditions is expected to subdue inflationary pressures, the Central Bank said.
The Monetary Board, at its meeting held on April 21, has decided to maintain policy interest rates of the Central Bank unchanged.
The expansion in monetary aggregates has begun to decelerate. Growth in broad money supply, which picked up towards end 2009, has declined to 17.4 per cent by February 2010.
The declining trend in credit to the private sector bottomed out in October 2009 and has since been growing in absolute terms, reflecting the gradual recovery in economic activity. This has been aided by the recovery in the global economy, the easing of the monetary policy stance as well as increased investor confidence.
Growth in the domestic economy is expected to gain momentum during the year, supported by these favourable conditions.
Reserve money has been expanding at a higher rate since the last quarter of 2009. The expansion has been mainly due to the increase in currency in circulation on account of the two elections held during the early part of 2010 coupled with the seasonal demand for currency.
The Bank is also monitoring the developments in the money market as excess rupee liquidity continues to remain high.
However, reserve money has begun to contract following the festive period. The Bank will continue to closely monitor the movements in monetary aggregates and take appropriate action if necessary.
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