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Dhaka, Bangladesh (BBN) – Core inflation rose by more than 1.0 percentage point last calendar year following an upward trend of non-food inflation in Bangladesh.

The core inflation expanded to 4.65 per cent on annual average basis in December last from 3.59 per cent in January 2018, according to the latest report of Bangladesh Bank (BB), the country’s central bank.

The figure was 3.94 per cent in July 2018.

The central bank of Bangladesh has already announced a ‘cautious’ monetary policy for second-half (H2) of this fiscal year (FY) 2018-19 aiming to curb possible inflationary on the economy.

The BB is now measuring the core inflation, excluding food and fuel components from the consumer price index (CPI).

Core inflation is a measure which excludes transitory or temporary price volatility as in the case of some commodities such as food items, energy products etc. It reflects the inflation trend in an economy.

The prime objective of computing core inflation is to separate out the components of headline inflation, officially known as general inflation, which is caused by non-monetary events, as these price changes do not reflect the impact of underlying monetary policy decisions.

The core inflation is calculated with more than 33 per cent contents of the CPI, a senior central banker told the BBN in Dhaka.

He also said the upward trend of non-food inflation pushed up the core inflation in 2018 despite the falling trend of headline inflation.

The non-food inflation rose to 4.51 per cent in December last on annual average basis from 3.52 per cent in January 2018 while the general inflation came down to 5.55 from 5.77 per cent in January 2018.

Talking to the BBN, an expert on monetary policy said easy monetary financial conditions that prevailed during last two years made credit available along with lower interest rates on deposit helped increase non-food inflation in the recent months.

In the first half of 2018, the private credit growth was high. But in the second half it subsided to some extent mainly due to the national election that held on December 30.

“To reduce non-food inflation, the authorities should take effective measures for curbing credit flow to unproductive sectors and to increase the interest rates on deposit that will help improve savings habit of the people,” the expert added.

He also said the inflation depends on different factors, including prices of commodities in the global market, weather, overall production and inflationary trend of close-door neighbouring countries.

The government had set the average annual inflation target at a maximum of 5.6 per cent for the FY 19.