• Wednesday, September 03, 2014

Inflation rises to 7.5pc

Non-food price hike fuelled the figure

Rejaul Karim Byron and Md Fazlur Rahman

Inflation edged up 15 basis points to 7.5 percent in January on the back of a non-food price hike, making it harder for the central bank to curb price pressures.
The figure comes less than two weeks after the central bank admitted it would face challenges in bringing down inflation to the desired 7 percent in the second half of the fiscal year. The concerns over inflation prompted the regulator to keep the policy rates unchanged.
Food inflation went down 19 basis points last month to 8.81 percent, while non-food inflation increased 65 basis points to 5.53 percent, according to data from the Bangladesh Bureau of Statistics.
The price hike in non-food items is responsible for the latest rise in inflation, reversing the recent trend, BBS Director General Golam Mostafa Kamal told reporters at his office in Dhaka yesterday.
Hassan Zaman, chief economist of Bangladesh Bank, said non-food inflation rose due to resumption of normal economic activity and wage increases in the manufacturing sector.
"We had anticipated this in our last monetary policy statement, which is why we didn't lower our policy rates," he added.
Zahid Hussain, lead economist of the World Bank in Dhaka, said the rise in inflation in January was expected and was driven entirely by an increase in non-food inflation in both rural and urban areas.  
"The increase in non-food inflation in turn reflects cost push resulting from the disruptions in supply caused by prolonged period of shutdowns and blockades in the last quarter of 2013."
He said the rise in non-food inflation might not last if political stability is sustained, since the demand is weak, monetary conditions are restrained and the exchange rate is stable.
Kamal, however, said the stable political scenario always has a positive impact on the economy.
"The availability of food items, which had to be stored at warehouses due to the unrest, has increased. Besides, farmers have also sold their stored crops and are now preparing to cultivate new rice. These have led to the fall of food inflation."
He attributed the rise in non-food inflation onto the hike in house rents in the first month of the year.
Meanwhile, BB said it would continue to focus on achieving its inflation targets while providing sufficient space in its monetary programme for lending to activities.

The BB's monetary policy statement for January-June urged the government to keep its bank borrowing for fiscal 2013-14 within the target of Tk 26,000 crore.
"Limiting the government borrowing from the banking sector is important for achieving inflation targets and providing space for banks to lend to the private sector," said the central bank.
The fiscal coordination council of the finance ministry is due to sit today with Finance Minister AMA Muhith in chair to finalise the revised budget.
The government's bank borrowing target will remain within the budgetary target though, a finance ministry official said.

Published: 12:00 am Thursday, February 06, 2014

Last modified: 10:38 pm Wednesday, February 05, 2014

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