Eid spending fuels inflation
Inflation edged up 7 basis points to 6.24 percent month-on-month in September on the back of a non-food price hike, making it harder for the central bank to curb price pressure.
“It is demand-driven, spending-driven and consumption-driven. So I see no signs of worry,” said Biru Paksha Paul, chief economist of the central bank.
Food inflation went down 14 basis points last month to 5.92 percent, while non-food inflation increased 38 basis points year-on-year to 6.73 percent, according to data from Bangladesh Bureau of Statistics.
“The increase is negligible,” Planning Minister AHM Mustafa Kamal told reporters while releasing the data.
The rise in non-food inflation was the effect of Eid-ul-Azha, he said. Zahid Hussain, lead economist of the World Bank's Dhaka office, and Paul echoed Kamal's views.
September's rise in non-food inflation is quite normal seeing that it coincided with the country's second largest religious festival, when people purchase electrical appliances and are willing to pay more for goods, Paul said.
“It is called the spending spree effect -- huge spending at a time can stoke price rise. And it is very natural.”
On the bright side, food inflation, on which the monetary policy has little or no control is on the decline, said the Bangladesh Bank chief economist.
Hussain said overall inflation has remained stable due to opposing changes in food and non-food inflation.
Food price increases in September was moderate despite increased demand due to Eid-ul-Azha and inclement weather, presumably because of adequate stocks and favourable import prices.
The rise in non-food inflation seems to be reflecting the direct and knock-on impact of gas and electricity price adjustments as well as stronger demand due to Eid, he added.
Kamal said the reason inflation has remained at a tolerable level in Bangladesh is because the exchange rate has stayed stable.
The inter-bank exchange rate has remained static over the last four months. On September 30, the exchange rate was Tk 77.80 per dollar, which was the same four months earlier.