December 31, 2008 / 10:35 AM / 10 years ago

UPDATE 1-S.Lanka inflation slows to 18-month low

(adds details, quotes)

By Shihar Aneez

COLOMBO, Dec 31 (Reuters) - Sri Lanka’s annual inflation fell to an 18-month low of 14.4 percent in December, its sixth straight month of decline from June record highs, government said on Wednesday.

Inflation fell from 16.3 percent in November and it record high of 28.2 percent, the Department of Census and Statistics data showed.

Sri Lanka’s annual average inflation eased to 22.6 percent from 23.0 percent in November. Analysts said falling oil and commodity prices and a tight monetary policy have helped bring inflation down. “This is mainly due to tight monetary policy,” said Mohandas Thangarajah, an analyst at First Guardian Equities.

The central bank expects inflation to drop to single digits in mid 2009 and said the decline so far was a proof its policy, targeting reserve money rather than interest rates, was working.

“We didn’t expect inflation to slow down so fast.” said Nandalal Weerasinghe, chief economist at the central bank.

Central bank governor said on Wednesday that interest rates will decline next year alongside falling inflation while growth should hold at 6 percent with the help of government efforts to prop up the economy. [nCOL36357].

A Reuters inflation survey <LK/INFL1> had expected the data to show consumer price inflation of 15.0 percent while annual average inflation was seen at 22.5 percent. (Editing by Tomasz Janowski)

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