Inflation crept up seven basis points in July, the first month of the new fiscal year, on the back of the spending spree accompanying Eid-ul-Fitr, the country's biggest festival.
Subsequently, it stood at 7.04 percent in contrast to 6.97 percent in June.
Food inflation stood at 7.94 percent, down six basis points from June, while non-food inflation gained 26 basis points in July to settle at 5.71 percent.
Zahid Hussain, lead economist of the World Bank's Dhaka office, said food inflation has declined because of boro harvests which have cooled the rise in rice prices.
Non-food inflation, he says, has increased most definitely for Eid and the sharp increase in remittance for it. The increase in farm income as a result of good boro harvest could also have contributed.
He advised the Bangladesh Bank to maintain vigilance as it implements the recently announced monetary policy.
He said inflation swings in particular months, and sees this increase as a one-off occurrence.
The rise in inflation in the first month of the new fiscal year might shake the confidence of the government, who has set a 6 percent target for fiscal 2014-15.
“It would have been better if we could bring inflation down to 6 percent. We will try to keep it between 7 percent and 7.5 percent in the current fiscal year,” said Kamal.
He said the seventh Five-Year Plan will also aim to keep the inflation target within 7.5 percent, instead of fixing it at 6 percent.
The minister said the economy would also have to live with inflation if it wants to grow at 7 percent.
“I will be happy if we can keep the inflation between 7 and 7.5 percent -- I think the economists will also agree with my point.”
The minister was defensive when asked whether the finance ministry's budgetary target of 6 percent inflation is unrealistic.
Instead, he said: “None of the targets is unrealistic. It could be 6 or 7 percent.”
The central bank's latest monetary policy, released in the last week of July, however, said the inflation would be 6.5 percent in the current fiscal year provided that no risks surface during the course of the year.
Global crude oil and food prices, both of which are on the rise, might test the government's inflation target.