April year-on-year inflation jumps to 7-month high

Wednesday, 2 May 2012 01:55 - - {{hitsCtrl.values.hits}}

Reuters: Sri Lanka’s annual inflation rate accelerated to a seven-month high of 6.1% in April from a year earlier mainly due to expensive imports after rupee depreciation and price hikes in fuel and electricity to reflect rising oil prices.

Inflation rose to 6.1%, above the 6.0% expected by analysts and up from 5.5% in March, according to a new consumer price index, Government data showed on Monday.

Higher costs for imported foods, electricity and transport were the main reason for the rise, the government data showed.

The rupee has depreciated 1.2% over the month, with high volatility and speculative trading pushing it to a record low of 133.50 on Wednesday.

It has fallen 12.2% since the Central Bank stopped intervening to defend a specific price on 9 February and 15.2% from 19 November, when the Government allowed a 3% devaluation.

Nevertheless, the Central Bank expects annual inflation to stabilise around 7-7.5% by end of 2012.

“The price adjustment impact is coming even in this month. But in the coming months, we expect it to stabilise as the effects of the policy changes come into force,” Central Bank’s Chief Economist Swarna Gunaratne told Reuters.

The Central Bank has raised its key policy rates twice, to two-year highs, and restricted credit growth to 18% compared with last year’s 35%, to slow imports and reduce pressure on the exchange rate.

The Government also has raised fuel and electricity prices along with the tax on imported vehicles, which accounted for $ 1.7 billion of the total $ 20 billion import bill last year.

Annual average inflation, measured on a 12-month moving average, eased to an 18-month low of 5.7% this month, from March’s 5.9%.

A Reuters poll of 14 analysts had forecast annual inflation would rise to 6.0% and annual average inflation slow to 5.7%.

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