Dhaka, Bangladesh (BBN) - Bangladesh’s inflation as measured by consumers' price index (CPI) moved up further in the month of July mainly because of increase in prices of both food and non-food items.
The rate of annual average inflation went up by 0.31 percentage point to 9.11 per cent in July from 8.80 per cent of the previous month while the point-to-point inflation rate rose to 10.96 per cent from 10.17 per cent, according to Bangladesh Bureau of Statistics (BBS) data.
"The upward trend of inflation is likely to continue in the coming months due mainly to higher food prices," Director General of the Bangladesh Institute of Development Studies (BIDS) Mustafa K Mujeri was quoted by the Financial Express (FE), a local newspaper, as saying.
The food price inflation rose to 13.40 per cent in July last from 12.51 per cent of the previous month while that of non-food items reached 6.46 per cent from 5.73 per cent on point-to-point basis.
Mr Mujeri, also a former chief economist of the central bank, also expects that the inflationary pressures may ease by the end of calendar year after arriving of new 'aman' crop.
The BIDS chief suggested coordinated efforts through monetary, fiscal and trade polices to curb inflationary pressures on the economy.
"Coordination of monetary, fiscal and trade polices is required to tame inflationary pressures on the economy effectively," he said, adding that it will be a difficult task to contain inflation only with the monetary policy-support of the central bank.
The central bank is now observing the overall inflationary trend in the economy closely, a senior official of the Bangladesh Bank (BB) said. "We will use our monetary instruments to help contain inflation if necessary," the central bank official said without elaborating.
The inflation may rise in the August-October period of this calendar year due to the holy Ramadan, two Eid festivals and Durga Puja, said another BB official while explaining the possible rising trend of inflation.
He also said the rising trend in prices of essential commodities including rice, sugar, edible oil, pulses and vegetables in the local market may exert further inflationary pressure on the economy in the month of August.
"Food prices are still influencing the country's overall CPI inflation," the central bank official said, adding that the government has been selling food grains from public stock at lower prices to provide some relief to low income people from the hardship of high food prices.
The major reason for the current spell of inflationary pressures was the supply-side factor rather than developments in the monetary sector, he said, adding that prices of many essential commodities including food grains have increased recently in the global market due to short-supplies.
"The food price component of both annual average and point-to-point CPI inflation has been in the double digit since December 2010, causing considerable hardship to the majority of the country's low income population, despite satisfactory growth in domestic output of major food crops including rice, potato and wheat," the BB said in its latest monetary policy statement (MPS), released on July 27 last.
Against the expectation about a moderation of domestic food CPI inflation in first six months of the current fiscal year (FY), non-food CPI inflation may come under some increase if the subsidized user prices of gas, electricity and petroleum are revised upward to relieve the government of the burden of a growing budget deficit, the MPS added.
"Given these realities, even as BB remains proactive in curtailing excess demand from undue monetary expansion, attaining the targeted decline of CPI inflation to 7.5 per cent in FY12 from the end FY11 level of 8.8 per cent may prove challenging," it noted.
BBN/SSR/SI-23Aug11-9:45 am (BST)