The Central Bank, this week in its Monetary Policy Review, indicated that the rate of inflation in the country may increase in the coming months, but at a mild rate.
In September, the rate of inflation decreased to 0.7%, from 0.9% in August, this year, as measured by the point-to-point change in the Colombo Consumers' Price Index (CCPI) .
However, the Central Bank in its Monetary Policy Review on Tuesday, said inflation worldwide is set to increase but in Sri Lanka will be at subdued levels. "Worldwide inflation is expected to pick up moderately in the ensuing months with the base effects of last year's high consumer prices driven by the commodity price bubble wearing out, as well as firming demand alongside the nascent recovery in global markets," said the Central Bank statement.
"Nevertheless, inflation in Sri Lanka is expected to be at subdued levels in the approaching months, with current inflation remaining at around 1% during the four months up to September 2009," said the financial sector regulator.
The financial sector regulator also said cost of credit for the private sector will reduce in the coming weeks with the drop in benchmark interest rates. Private sector credit demand is expected to grow with increased economic activity.
The Central Bank said benchmark yield rates on Treasury Bills dropped by around 800 - 865 basis points by the first week of October this year, compared to the end of last year. This drop in benchmark yield rates, is expected to filter down to other market interest rates to reduce cost of credit.