Overall inflation dropped to 9.94 per cent in January as cheaper winter vegetables tamed its rate but food inflation yet stayed high pushed by pricey staples.
A decline of approximately 1.0-percentage point from the December rate took the overall inflation down double-digit level last month, Bangladesh Bureau of Statistics (BBS) revealed Tuesday.
This happens to be the first time in three months that inflation edged down to a single-digit level. The last time it was below 10 per cent was in September when it stood at 9.92 percent, according to data produced by the national statistical organisation.
The decline in inflation was primarily driven by falling vegetable prices, which contributed most to the lower January inflation rate.
However, food inflation remained high in both rural and urban areas, exceeding 10 per cent, as the market of staples stayed wayward. In January, urban food inflation stood at 10.95 per cent while rural food inflation was recorded at 10.18 per cent.
The 12-month moving average inflation rate remained above 10 per cent at 10.34 per cent, unchanged from December.
A growing concern is the steady increase in non-food or core inflation in both rural and urban areas.
Officials at the central bank, which is implementing a tight monetary policy to curb inflationary pressures on the economy, said the prices of staples and edible oils remained high in retailing. Without these hikers, the overall inflation rate could have been lower.
They hold the hope that the downtrend in inflation would continue in the months ahead. Meanwhile, Finance Adviser Dr Salehuddin Ahmed takes until June
for inflation moderation to 6.0-7.0 per cent. Speaking to reporters the same day, he said Bangladesh’s economic situation was worse than Sri Lankan’s for wanton plunder here, which made it hard for the interim government to put things in order.
Economists attribute the rise in non-food inflation mainly to price increases in the clothing and housing categories.
“All other components of non-food inflation have declined. It seems the exchange-rate depreciation in December, which persisted into January, may have been a key factor,” says Dr Zahid Hussain, former lead economist at the World Bank Dhaka office.
The drop in food inflation is largely due to improved supply conditions in winter, with many vegetables selling cheaper than cost price on abundant supply.
“The decline appears smaller than expected based on historical seasonal patterns,” the economist recalls. He emphasises that the message for monetary policy is clear: “Maintain the tight stance.”
The Bangladesh Bank is set to unveil its half-yearly monetary policy on February 10 for the rest of the financial year.
However, he admits that the decline in inflation would be a “huge relief” for households, especially those with limited incomes, for example, clothing workers.
He feels the stubbornness of food inflation needs grinding down immediately.
Dr Masrur Reaz, chairman and CEO of Policy Exchange Bangladesh, says the inflation decline as good news but cautions that food inflation remains high and continues to affect low-income people.
He suggests the central bank “should maintain its tight monetary stance as global prices for key commodities, including rice, remained elevated in December compared to November”. https://today.thefinancialexpress.com.bd
