Sri Lanka’s inflation felt in October, its lowest level since January 2016 with the Central Bank’s action of maintaining policy interest rates at 7.25 per cent and 8.50 per cent, respectively, the Central Bank (CB) announced on Monday.
In order to stabilise Sri Lanka’s inflation at mid-single digit level and maintain neutral monetary policy stance, the Monetary Board of the CB has increased the Standing Deposit Facility Rate (SDFR) by 75 basis points to 8 per cent and the Standing Lending Facility Rate by 50 basis points to 9 per cent this month.
Headline inflation as measured by the year-on year change in the National Consumer Price Index (NCPI 2013=100)1 continued to decline for the third consecutive month, recording 0.1 per cent in October 2018, the lowest since January 2016, the CB announced.
The deceleration observed in year-on-year inflation in October 2018 was mainly driven by the higher base prevailing during the corresponding month of the previous year due to higher food prices. Year-on-year food inflation dropped for the third consecutive month and recorded -6.6 per cent in October 2018.
However, year-on-year non-food inflation continued to increase and reached 5.8 per cent during the month. The change in the NCPI measured on an annual average basis decreased to 3.3 per cent in October 2018 from 4.0 per cent in September 2018.
The month-on-month change of the NCPI increased by 0.4 per cent in October 2018 due to increase in the prices of the items in the non-food category, particularly that of transport (petrol, diesel).
Meanwhile, prices of the items in the food category declined during the month where prominent price declines were observed in fresh fish, eggs and coconuts.
The core inflation, which reflects the underlying inflation in the economy, increased to 3.4 per cent in October 2018 from 3.1 per cent in September 2018 on a year-on-year basis.
Meanwhile, annual average core inflation remained unchanged at 2.4 per cent in October 2018.(Bandula)
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