Inflation declines to 5.8 percent in April

Inflation, as measured by the year-on-year change in the Colombo Consumers' Price Index (base=2002) declined to 5.8 percent in April 2010 while annual average inflation increased marginally to 3.4 per cent.

Price pressures in the economy have been dampened by improvements on the supply side, particularly the noteworthy performance in paddy production in the Maha season.

Prices of key commodities in the international markets also remain subdued, reducing price pressures in the near term, the Central bank said yesterday.

Developments in the monetary sector have been encouraging. Credit obtained by the private sector, which contracted since April last year, on a year-on-year basis, has begun to improve and indicates a positive growth in March 2010. This development is attributable to the easing of monetary policy as well as improving financial conditions and the resulting downward adjustment in market interest rates. The gradual expansion in credit obtained by the private sector indicates the solidifying recovery in the economy. Meanwhile, growth in broad money moderated to 17.1 percent, year-on-year, by March 2010, from 18.6 percent at end 2009.

Accordingly, broad money growth remains compatible with the levels targeted in the monetary programme announced at the beginning of the year.

Taking into consideration the above developments, the Monetary Board, at its meeting held on May 19 has decided to maintain policy interest rates of the Central Bank unchanged.