Macroeconomic Forecast Sri Lanka

Headline inflation hit a 28-month low of 2.7% y-o-y in February, falling sharply from 3.8% in the previous month. Meanwhile, core inflation remained unchanged at 4.7% y-o-y for the second consecutive month. The current spate of disinflation continues to be on the back of falling food inflation, which hit -4.1% y-o-y in February, down from its peak in April 2011 of 14.3%. Indeed, non-food inflation saw a sharp increase in February, with the figure rising from 7.4% y-o-y in January to 9.2%. The latest data poses downside risk on our 2012 year end consumer price inflation forecast of 3.5%.

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