Consumer prices in the capital Colombo rose 17.2 percent from a year ago, after gaining 17.3 percent in September, according to the median forecast of eight analysts in a Bloomberg survey. The statistics department index, the key inflation gauge watched by the central bank, is due tomorrow at 3 p.m. in Colombo.

Sri Lanka's central bank last week held its benchmark interest rate unchanged at 10.5 percent for an eighth straight meeting. Borrowing costs at a five-year high are sufficient to contain inflation and spur growth, central bank Governor Nivard Cabraal said Oct. 21.

``There may be less money in circulation and people are feeling that and not spending as much,'' said Rachini Rajapakse, who helps oversee the equivalent of $22 million of stocks and bonds at Unit Trust Management Co. in Colombo. ``Price rises came only from flour, bread and related food items.''

Food prices are rising worldwide because of greater use of grains for biofuels and poor weather, the International Monetary Fund said in a report this month.

The central bank's three rate increases between September and February helped slow inflation from a decade high of 20.5 percent in January. Inflation has been easing as higher borrowing costs damp money supply and loan growth.

Civil War

Credit growth in Sri Lanka's private sector, including consumers, slowed to 24 percent in July, compared with 27.8 percent a year earlier. The central bank was able to meet its reserve money targets in the first three quarters of 2007, it said on Oct. 26.

The $26 billion economy, which has also been constrained by renewed violence in the island's civil war, will expand in 2007 less than previously estimated, the governor said this month.

Economic growth this year will be between 6.5 percent and 6.6 percent from an earlier projection of 7 percent, said Cabraal, who also cut his expansion outlook for 2008 to 7.5 percent from 8 percent.

The economy may expand about 6.7 percent this year, from an earlier estimate of 7.5 percent, amid slower agriculture production, the central bank said Oct. 26.

Citigroup Inc. expects the economy to expand 6 percent this year from 7.4 percent in 2006.

The following is a table of analysts' estimates for Sri Lanka's inflation rate in October.

--------------------------------------------------------                                      OctoberFirm                           From year    12-Month                               Earlier      Moving Average--------------------------------------------------------Median                           17.2%       17.6%Average                          17.1%       17.6%High                             17.8%       17.8%Low                              16.0%       17.3%Number of Estimates                8           8-----------------------------------------------------Capital Alliance                 16.6%       17.4%Ceylinco Shriram                 16.0%       17.3%HNB Securities                   17.5%       17.6%Lanka Orix Securities            17.5%       17.8%Seylan Bank Asset Management     17.8%       17.6%Standard Chartered Bank          16.8%       17.6%SMB Securities                   17.5%       17.8%Unit Trust                       16.7%       17.5%

To contact the reporter on this story: Anusha Ondaatjie in Colombo, Sri Lanka at This e-mail address is being protected from spam bots, you need JavaScript enabled to view it

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