Inflation crawls down

Inflation came down 9 basis points to 6.39 percent in June on the back of a decline in food prices, according to Bangladesh Bureau of Statistics.

In the international market, the prices of various consumer items, including sugar, edible oil and lentil, witnessed a decline, said Planning Minister AHM Mustafa Kamal yesterday while releasing the data.

Alongside, the production of corn and rice was good, which pulled down inflation, he said.

In June, food inflation declined 58 basis points to 5.98 percent. In the previous month too it declined: 95 basis points to 6.56 percent.

Rice price fluctuated but it remained within control and the food stock in government silos was sufficient. “The food stock is good enough for the next year,” he added. However, non-food inflation surged 79 basis points to 4.87 percent in June, according to the BBS data.

But in May, non-food inflation went up 41 basis points from April.

The decline in year-on-year headline inflation in June relative to both May this year and June last year largely reflects the drop-off in food inflation, said Zahid Hussain, lead economist of the World Bank's Dhaka office.

“This is a reflection of the stable rice prices following a good boro harvest.”

However, the food inflation is still high and could rise in the near future with increase in rice prices due to the re-imposition of 25 percent customs and 3 percent regulatory duties on rice imports in the budget for fiscal 2018-19. “Also, the international commodity prices are gaining strength,

depreciation of the

taka is continuing and monetary policy has recently shifted towards an expansionary stance.”

The rise in non-food inflation could be reflecting the second-round effects of high food inflation experienced since early 2017 as well as exchange rate depreciation and strong domestic demand.

“The fact that both food and non-food inflation were higher in June relative to May signals very clearly that there is no room for complacence because of the decline in headline inflation.”

The authorities must, therefore, remain vigilant and prepared to tighten macro policies if inflation shows tendencies to exceed the 5.6 percent target set in the budget for this fiscal year, Hussain added.