Inflation edges down on lower commodity prices

Inflation declined 4 basis points to 5.61 percent in April on the back of the lower rice and vegetable prices at home and the slump in commodity prices in the international market.

Last month, food inflation dropped 5 basis points to 3.84 percent and non-food inflation 2 basis points to 8.34 percent, according to data from the Bangladesh Bureau of Statistics.

Planning Minister AHM Mustafa Kamal, while releasing the data yesterday, said food inflation fell as the prices of rice and vegetables were low. Non-food inflation also fell as global commodity prices were low.

Citing the recent trend, Kamal forecast that inflation will not rise during Ramadan.

However, the buying frenzy in the lead-up to Eid-ul-Fitr will spark off inflationary pressures. “But it will remain within tolerable levels.”

“We are always trying to maintain people’s buying capacity by keeping inflation at tolerable levels and we have had huge success on this front,” Finance Minister AMA Muhith said in parliament last week.

 The slump in fuel price in the international market, continued growth in agriculture sector and satisfactory food stock, favourable money supply and the stable political situation contributed to it. “In future, inflation will come down even further,” Muhith added.

Meanwhile, the World Bank, in the latest edition of its Bangladesh Development Update, said the non-food inflation, which has perpetually remained above 8 percent, is high.

Bangladesh's current inflation target of 6.1 percent is higher than its trading partners. India, for instance, has set a target of 4 percent, with a band of plus or minus 2-percentage points.

The persistence of high inflation in an environment characterised by declining commodity prices reflect the influence of supply-side bottlenecks and a lack of pass-through of international price to domestic market, said the report, which was unveiled on Saturday.

Though the government has recently lowered the price of various petroleum products, the price of diesel, a big part of inflation, saw a token cut. If the diesel price is not lowered substantially, it will not have much impact on non-food inflation, according to observers.