Published on 12:00 AM, September 29, 2021

Non-food inflation jumps

Source: BBS

Overall inflation rose 18 basis points to 5.54 per cent in August owing to the rise in demand and the abnormal hike in transport cost following the reopening of the economy from the coronavirus-induced lockdowns, official figures showed.

This compared with 5.36 per cent in July, according to data from the Bangladesh Bureau of Statistics (BBS).

Non-food inflation pushed up the general inflation: non-food inflation increased 33 basis points to 6.13 per cent in August.

Food inflation rose to 5.16 per cent, up eight basis points from a month ago.

This led experts to call for tightening money supply to rein in inflation as it is already hurting the lower-income groups, which have been facing reduced incomes since the start of the pandemic.

Prices of almost all kinds of rice, egg, lentil, edible oil, chilli, sugar, some varieties of fish, garlic, onion, ginger, and turmeric went up in August, the BBS said.

On the other hand, consumers had to spend a bit less on potato, brinjal, lady's finger, and green papaya as their prices dropped.

"Non-food inflation will rise normally," said Ahsan H Mansur, executive director of the Policy Research Institute.

So, the BB should adopt a contractionary monetary policy, he said.

"The central bank needs to reduce the liquidity in the banking system by formulating a tight monetary policy."

A senior official of the planning ministry said the transport cost was low because of lower demand during the lockdowns at home and abroad.

With the re-opening of the economies, the transport cost has started rising unusually worldwide that has also impacted badly in the economy of Bangladesh, he said.

For instance, the freight charge went up by 100 per cent to 400 per cent, raising the prices of basic commodities in the country.

In its monetary policy statement this month, the central bank said due to global inflationary pressures, many countries are also facing rising commodity and food prices, putting low-income people at risk.

Besides, disrupted labour markets because of the pandemic worsened the peoples' purchasing capacity, indicating a need for income support for the vulnerable population segment before the market conditions normalise.

Given the economic adversities due to the Covid-19 pandemic, the BB said it would continue its ongoing pro-growth expansionary and accommodative monetary policy stance to support investment and employment-generating activities, and help create enabling conditions for the businesses to normalise production and supply chains. 

"BB will also remain watchful about the commodity and asset price developments in the country while stay engaged in selecting the priority sectors and ensuring the required funds in the system through various policy options under its disposal."