Inflation drops to 18-month low

Inflation crawled down to its lowest in 18 months in September on the back of the continuous fall in food prices.

Last month, inflation stood at 5.43 percent, down 5 basis points from the previous month, according to Bangladesh Bureau of Statistics.

The last time the inflation rate was lower than this was back in March 2017, when it stood at 5.39 percent.

“The prices of food items in the international market were low and food production in Bangladesh was also good,” said Planning Minister AHM Mustafa Kamal while unveiling the latest inflation data at the planning ministry in the capital.

As a result, food inflation is now low and there is no possibility of it to rise in the near future, he said.

“This is comforting,” said Zahid Hussain, lead economist of the World Bank's Dhaka office.

In September, food inflation fell 55 basis points to 5.42 percent from the previous month. This was preceded by 21 basis points decline the previous month. Non-food inflation though shot up 72 basis points to 5.45 percent last month.

The pace of decline in food inflation is slowing while non-food inflation has continued to increase -- a worrying development, Hussain said.

“Policy makers therefore cannot afford to be complacent.”

Rice price in September were on average 1 percent higher than in August. Acceleration in non-food inflation is due because of increased domestic demand fuelled by higher remittances and other stimulus to private expenditures.  Cost push factors may also have played a role as exchange rate has continued to depreciate and transport costs appear to have increased, Hussain said.

Meanwhile, Kamal assured that inflation will not be affected by the increase in fuel price rise in the international market. “The contribution of fuel to the inflation basket is very low.” People in developed countries, the use of cars is much more, so their oil consumption is higher. Subsequently, when the fuel price soars, the impact is felt on the economy, Kamal added.