Sri Lanka's Inflation Could Reach 7 Pct On Fuel Price Pressure: Central Bank

COLOMBO, June 2 (Xinhua) -- Central Bank of Sri Lanka (CBSL) Governor Nandalal Weerasinghe has said the recent monetary policy tightening was aimed at preventing inflation from moving toward higher levels that could place heavier pressure on households.

Speaking on a local TV program on Monday, Weerasinghe said inflation, currently projected around 5.4 percent to 5.5 percent, could move closer to 7 percent if rising fuel prices and steady consumer demand continue.

He warned that if inflation were to rise to around 10 percent, the public would face greater hardship. The central bank recently raised the Overnight Policy Rate by 100 basis points to 8.75 percent, citing domestic and global risks.

CBSL data showed Colombo Consumer Price Index-based headline inflation rose to 5.5 percent in May from 5.4 percent in April, remaining slightly above the 5 percent target.

The central bank said the increase reflected domestic energy price adjustments amid the ongoing Middle East conflict. Weerasinghe said the Middle East conflict had lasted longer than initially expected, pushing up global fuel prices and adding pressure to Sri Lanka's inflation outlook.

He said demand would have to ease in the coming months to prevent a further acceleration in prices and maintain economic stability. 

--NNN-Xinhua