Sri Lanka’s inflation slowed for a second straight month, supporting the central bank’s decision to cut borrowing costs this month and spur economic growth.
Consumer prices in the capital, Colombo, rose 6.8 percent in January from a year earlier after gaining 6.9 percent in December, the statistics office said on its website today. The median estimate of five economists in a Bloomberg News survey was for a gain of 7 percent.
Governor Ajith Nivard Cabraal this month cut a key interest rate for the third time since July, contrasting with counterparts from India to Thailand who tightened monetary policy. The floods in Sri Lanka’s northeast won’t prompt a change in rates, Cabraal said Jan. 18, pointing to adequate rice stocks that can check any spurt in food prices.
“With growth being the priority, the central bank will take every opportunity to keep borrowing costs low,” Sanjeewa Fernando, an analyst at CT Smith Stockbrokers Pvt Ltd in Colombo, said before the report.To keep prices under control, Sri Lanka this month almost halved import taxes on milk powder to 28 rupees a kilogram. The government also slashed customs duty on gasoline by 67 percent to five rupees (4 cents) a liter.
“The government’s measures will keep a check on inflationary pressures,” CT Smith’s Fernando said.
Sri Lanka is aiming to accelerate growth to 8.5 percent in 2011 and 9 percent in 2012 from an estimated 8 percent expansion in 2010, Cabraal said Jan. 4.
India on Jan. 26 boosted rates for the seventh time in a year to rein in inflation. Thailand on Jan. 12 increased its benchmark rate for the fourth time in seven months.
To contact the reporter on this story: Anusha Ondaatjie in Colombo at anushao@bloomberg.net
To contact the editor responsible for this story: Stephen Foxwell at sfoxwell@bloomberg.net
