Inflation eased further

For the fourth month in succession, the inflation as measured by the year-on-year change in the Colombo Consumers' Price Index (CCPI) (2002=100), decelerated further in October, 2008.

At the same time, the core inflation, which measures the price movement of non-food and non-energy items of the CCPI basket, also witnessed a reversal of the upward movement of the year-on-year inflation for the first time in 2008.

The rate of headline inflation decreased significantly to 20.2 per cent in October, 2008 from 24.3 per cent recorded in September, 2008 having continuously decelerated from the peak of 28.2 per cent in June, 2008. The monthly CCPI also recorded a decrease of 0.3 per cent in October, 2008 compared with an increase of 0.4 per cent in the previous month, mainly due to declines in food prices such as fresh fish, onion, coconut, coconut oil, meat, rice, sugar and dried fish.

The annual average rate, however, moved slightly upward from 23.2 per cent to 23.4 per cent between the two months, reflecting the cumulative effect of the increase in the Index during the preceding 12 month period.

The core inflation, on a point-to-point basis, decelerated to 18.1 per cent from 18.7 per cent in the previous month, although the annual average rate rose from 11.1 per cent to 12.1 per cent.

The deceleration in inflation was supported by improvements in domestic supply factors, moderation of international commodity prices and reduced demand pressures due to tight monetary policy stance adopted by the Central Bank to curb demand driven inflation.

The recent price revisions made on electricity and LP gas will also have a favorable impact on the future movements in the CCPI.