August 28, 2009 / 5:42 AM / 10 years ago

PREVIEW-S.Lanka's Aug CPI seen up, avg inflation at 8.5 pct

 * What: August consumer price index (CPI)
 * When: Monday, Aug 31, about 3:00 pm (0930 GMT)
 * August CPI seen up 1.8 pct y/y vs 1.1 pct in July
 * 12-mo annual average inflation seen up 8.5 pct
 By Shihar Aneez
 COLOMBO, Aug 28 (Reuters) - Sri Lanka's year-on-year
consumer price inflation is expected to have risen for a second
straight month in August due to increased consumer demand and
the impact of a fuel price increase last month.
 The median forecast of nine analysts predicted August
consumer prices will have risen to 1.8 percent, compared to 1.1
percent in July. They hit a record low of 0.9 percent in May.
 Record world oil and commodity prices drove it to a
six-year high of 28.2 percent in June 2008.
 The 12-month moving average inflation is expected to slow
to 8.5 percent, running in single-digit territory for the first
time since November 2006. It is currently at a 30-month low of
10.4 percent. It hit a 6-year high of 23.4 percent in October.
 "We expect a marginal increase due to increased consumer
demand and the trickle-down effects of fuel and gas price
increases in the past two months," Danushka Samarasinghe, head
of research at Asia Securities, told Reuters.
 The government increased fuel prices on July 2 citing high
global crude oil prices. [ID:nSP510363]
 The central bank has said consumer prices will rise to 5-6
percent by the end of 2009 due to an expected recovery in Sri
Lanka's $40 billion economy, bouyed by post-war optimism and a
return of economic activity in the island's former war zone.
 The government last month said the economy is expected to
expand by 5 percent this year, stronger than the previously
forecast minimum of 2.5 percent, after the country reached a
$2.6 billion loan accord with IMF. [ID:nCOL508536]
 Economists have said consumer prices will rise on an
expected increase in tax and energy prices as the government
has agreed with the IMF to trim its fiscal deficit to 7
percent.
 The central bank has not changed its monetary policy rates
in two months, say past reductions have not been
proportionately reflected in market lending rates.
 Central bank officials have said the current rates are
adequate for banks to reduce market lending rates to around 12
percent, compared to the current rate of 14 percent.
 Sri Lanka's economy grew at a four-year low of 6 percent in
2008, compared to 6.8 percent in 2007, due to the central
bank's inflation-busting policy of tightly controlling the
money supply.
 The Census and Statistics Department introduced a new
inflation index formally in December 2007, with 2002 as the
base year, saying the old measure was outdated.
  CCPI                      Index     12-Mo Avg     vs year ago
-------------------------------------------------------------
  Median                    210.0        8.5            1.8   
  Average                   209.7        8.5            1.7   
  Low                       208.9        8.4            1.3   
  High                      210.1        8.5            1.8   
  No. of contributors           9          9              9
 Note: The following contributors participated in the poll:
Acuity Stockbrokers, Commercial Bank of Ceylon, HSBC, Citibank,
National Development Bank (NDB) Nations Trust Bank (NTB),
Hatton National Bank (HNB), Bank of Ceylon, and People's Bank.
 (Editing by Bryson Hull)



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