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CB
warns of higher inflation
Though earlier forecasting a decline in inflation this year,
the Central Bank with the sharp spike in oil prices, is warning
of a higher cost of living, in 2008.
It said that inflation, as measured by the point to point
change in the New Colombo Consumers’ Price Index [CCPI
(N)] reached 25.0 per cent, during April, compared with 23.8
per cent growth, recorded in the previous month. “The
continuous rise in international commodity and oil prices,
as well as, domestic supply constraints, caused a higher than
expected increase in inflation, during the month. The rapid
surge in global crude oil prices, as well as, the high prices
of other commodities, has led to persistent inflation pressures
worldwide,” the Bank said.
The continuation of the unprecedented surge in crude oil prices,
has naturally lead to the substantial upward revision, in
domestic fuel prices, inevitably leading to an increase in
headline inflation in the coming months, although, it would
contribute to softening the rising inflationary pressures,
in the year 2009 and beyond.
“In these circumstances, there is a strong likelihood
of the actual 2008 inflation being significantly higher than
the previous estimates, which were computed on the basis of
the crude oil prices, during the year 2008, being at an annual
average of around US dollars 90,” the Central Bank said.
Over the past few months, the Central Bank has been implementing
a tight monetary policy stance, to contain the demand driven
inflationary pressures in the economy. These policy actions
and other prudential measures, have been instrumental in bringing
down the high rate of expansion, in the monetary aggregates,
the Bank added.
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