Sri Lanka's annual average inflation eased to 21.6 percent from 22.6 percent in December. Economists polled by Reuters had expected annual average inflation rate of 21.65 percent. 

"This is mainly due to a sharp drop in fuel and commodity prices. The fall in prices of consumer goods along with a very effective monetary policy also helped," Danushka Samarasinghe, head of research at Asia Securities, said.

Inflation fell from 14.4 percent in December and a record high of 28.2 percent, the Department of Census and Statistics data showed. 

The government on Dec. 30 slashed diesel prices by 12.5 percent after world oil prices fell sharply. 

Last week, Central Bank Governor Ajith Nivard Cabraal told Reuters single-digit inflation would be a reality much sooner than his original estimate of mid-2009. 

Sri Lanka's monetary programme for this year is based on economic growth of 5.0-6.0 percent and annual inflation of around 9 percent, the central bank has said. 

The central bank, which targets reserve money to keep inflation down, has said that strategy is working, and that falling inflation will also help reduce interest rates. 

A Reuters inflation survey <LK/INFL1> had expected the data to show consumer price inflation of 11.5 percent while annual average inflation was seen at 22.65 percent. [nCOL425450]. 

(Reporting by Shihar Aneez; Editing by Bryson Hull and Kazunori Takada)

Courtesy: reuters.com