Inflation creeps up in January

Inflation edged up 12 basis points to 5.15 percent in January, after being on the decline for several months, on the back of a rise in food prices, especially of the staple rice.

The increase in the prices of coarse rice and the admission cost for students at the beginning of the year contributed to the rise in inflation, said Planning Minister AHM Mustafa Kamal as he disclosed the inflation figures at the Planning Commission in the capital.

Last month, food inflation soared 115 basis points to 6.53 percent; it was 5.38 percent in the previous month.

However, non-food inflation dropped to 3.10 percent in January, a decline of 139 basis points from a month earlier.

Though inflation is still below the government's budgetary target of 5.8 percent, the Bangladesh Bank announced a cautious monetary policy at the end of January instead of an expansionary one anticipating a rise in inflation in future.

The average core inflation, the traditional measure of underlying long-term inflation, has also nosed down but remains elevated at around 7.6 percent in December, indicating that inflation can pick up if buffeted by adverse shocks, said the latest monetary policy statement.

Looking ahead, the global commodity outlook suggests some upward price pressures may emerge from higher import prices, it also said. Finance Minister AMA Muhith on January 29 told the parliament that he was hoping inflation would not increase in future because of the satisfactory agricultural output, stable price of petroleum products in the international market and normal supply of commodities due to the stable political situation.

However, non-food inflation has been on the decline since June last year and the trend continued in January.

The steady decline in non-food inflation has to do with the weakening of aggregate demand caused by a large decline in remittances, Zahid Hussain, lead economist of the World Bank's Dhaka office, earlier told The Daily Star.

The fall in remittance has reduced the purchasing power in both rural and urban areas significantly, he said.

Remittance inflow slumped by about $2 billion in 2016 from a year earlier despite a 35 percent increase in migrant worker outflow during the period.

In addition, there were no upward adjustments in the administered prices of gas and electricity that could sustain the cost push impact of the earlier increases in these prices, Hussain added.