Income inequality persists despite enough money in circulation: CB Governor

by Sanath Nanayakkare

Income inequalities persist although there is enough money in circulation in the economy, the Central Bank Governor Dr. P. Nandalal Weerasinghe said yesterday.

The Governor said so responding to a question posed by The Island Financial Review at the press conference held by the Central Bank after announcing its latest Monetary Policy stance.

When asked about the current trend of consumers spending less on food, clothes, pharmaceuticals and consumer durables and the ordinary people not having money in their hands, and it appears unlikely that consumer spending will reach the pre-crisis levels in the foreseeable future, the Governor said,” There is sufficient liquidity in the market and money in circulation is not an issue. How do you get money in your hands? You get money in your hands from employment. Depending on the nature of your employment, you get money on your hands.”

When asked whether that meant a larger stock of the money supply controlled by the Central Bank goes to a smaller segment of the society and a small share of that money supply goes to the larger section of the ordinary people, the Governor replied,” The income inequality has always been there in the society. It is not a phenomenon connected to the money supply which is a target variable for Central Bank policy.”