South Asian Business news and information

Sri Lanka Central  Bank’s core inflation index was 9.6% in May 2008 against ‘headline’ inflation of 26.2%. Central Bank has also said that it has dropped a number of items including food from its core inflation index. In May, the ‘core’ index of the country grew 0.3% compared to 0.9% in April and moving average rose 7.9% from 7.7% in April.  

Lanka Business Online reports:  

Core inflation indices were originally developed to provide 'early warning' to monetary policy but has now increasingly come under fire for leading policy makers astray.

In the US the 'core' index has neither food nor energy which its central bank claimed were 'volatile' and dropped. But economists say such goods respond most quickly to central bank money printing.

The current commodity bubble, worsened by massive US money printing since August 2007 has strengthened the case of critics of central banking and weakened the case for using core indices to guide monetary policy.

Though there is talk of a food 'crisis' especially among politicians world wheat and rice production are at a new record this year.

Related article:
Lanka Business Online