Inflation up in January

Consumer prices increased in January 2008 largely due to low supply of domestically produced agricultural commodities (rice, vegetables, coconut and fish), exacerbated by continued increase in world prices of certain food products (wheat, milk products, sugar and dhal) and upward revision in the prices of petroleum products.

As measured by New Colombo Consumer Price Index (CCPI(N)), consumer prices have increased by three per cent in January, 2008 compared to the previous month.

Eighty per cent of such increase was attributed to increases in food prices, while the price revision of petrol, diesel, and kerosene and LP gas contributed to further 16 per cent. Accordingly, inflation as measured by point to point change in CCPI(N) increased to 20.8 per cent from 18.8 per cent in December 2007, while the annual average inflation rose to 16.4 per cent.

An upward movement in inflation was observed since mid 2007 largely due to the removal of fuel subsidy and increases in prices of imported food products.

The pass through of international price increases, though it leads to a one time increase in prices, will have a favourable impact on containing future inflation by eliminating the need for subsidising same, through expansionary borrowings of the Government.