CB aiming for single-digit inflation before year end

Hiran H.Senewiratne

INFLATION: The Central Bank (CB) is planning to contain the inflation level to a single digit through its monetary policy before the end of this year, Economic Research Department sources of the CB said.

To cushion inflation from the medium to the long term, the Central Bank recently increased bank interest rates by 50 per cent base points and also conducted open market operations to control the amount of money going out of the CB.

According to CB statistics, in January the country’s inflation was around 19.2 per cent and in February it came down to 18 per cent. During the month of March and April the inflation rate would probably go up due to the high imports for the Sinhala and Tamil New Year.

CB sources said that besides increasing interest rates by 50 per cent basis points and conducting open market operations to control its money going out, the Bank by trading in government securities will be able to control inflation to a greater extent within the next few months.

Usually, the CB does not get involved in exchange rate policy matters which is charaterised by a floating exchange rate regime, driven by demand and supply.

The current high inflation trend is seasonal and imports are a major concern during this festive season.

It will continue only for a short period, sources said.

The CB forecasts that the country’s exports and worker remittances would increase during the next few months and in turn the current inflationary pressure will die down gradually.

In the mean time, the Ministry of Trade, Commerce and Consumer Affairs has identified ten essential food items to be sold at standard prices for consumers during the festive season, Additional Secretary Sam Edirisooriya said.