Central Bank for new Consumer Price Index

Ramani KANGARAARACHCHI

The Central Bank as well as the country is in need of a more representative and accurate Price Index (CPI) to better understand the movements of price levels. Governor Central Bank Ajith Nivard Cabraal said.

Ajith Nivard Cabraal

Making a presentation on monetary policy at the Central Bank recently, he said the move of the Department of Census and Statistics (DCS) to update the existing Colombo Consumers Price Index (CCPI) Index in 2010 based on the findings of the Household Income and Expenditure Survey 2006-2007 is a positive development.

“Such periodic revisions of the CCPI will keep abreast of the changing lifestyles and expenditure patterns of the public, making it more representative and realistic measure,” he said .

He hoped that inflation will be contained within single digits in 2010. “Inflationary pressures are expected to be moderate, enabling inflation to be maintained at single digits during the year and on an annual average basis, inflation is projected to be 5-6 percent by the end of 2010,” he said.

Cabraal said that the monetary policy strategy will provide useful information about the underlying trends in inflation in the country and it has to be guided by the trends in underlying inflation, and hence, a proper measure of core inflation is imperative.

The current core inflation measure, although a major improvement over the previous measures, has several weaknesses. Hence, a series of alternative core inflation measures, based on different approaches, are now being reviewed. After such review, a new core inflation measure is proposed to be introduced this year.

The Central Bank will continue to discuss its policy decisions informing the general public of the various measures taken, and setting out the rationale for such measures to avoid adverse market sentiments, he aid.