Inflation slows further down
Inflation stood at 5.4 percent in July, which is the lowest in 45 months, helped by a decline in the prices of non-food items.
The decline gives the government confidence in reaching its inflation target -- 5.8 percent -- set for the current fiscal year.
Non-food inflation contributed to the fall in overall inflation last month: it stood at 6.98 percent in July, down from 7.5 percent in June, according to Bangladesh Bureau of Statistics.
Food inflation rose marginally to 4.35 percent in July from 4.23 percent a month earlier.
Inflation stood at 5.92 percent on average in fiscal 2015-16 -- the lowest in 12 years and even lower than the government's budgetary target of 6.2 percent.
Satisfactory agricultural production, a slide in fuel prices on the international market and prudent macroeconomic management helped lower inflation, according to the government.
Sadiq Ahmed, vice-chairman of the Policy Research Institute of Bangladesh, however thinks the inflation rate remains stubbornly high relative to the global rate.
Inflation in Bangladesh is among the highest in the South-East Asia region, and substantially higher than its major trading partners in Europe and America, the former economist of the World Bank wrote in an article.
As global inflation has come down dramatically to the 2-3 percent range, there is little justification for Bangladesh to inflate at the 6 percent rate, he said.
Global commodity prices have fallen substantially, providing a major opportunity for countries to reduce their domestic inflation through proper conduct of fiscal and monetary policies.
“By failing to take advantage of this opportunity, Bangladesh Bank seems to be missing the boat.”
The economist said the decision to further relax monetary policy and aim for higher growth in private credit in the face of rising trend of core inflation is counter-intuitive.
The evidence suggests that the higher growth of liquidity will not likely help private investment or gross domestic product growth but might simply feed into inflation, Ahmed wrote.
“The monetary policy statement does not address the fundamental problems of tackling inflationary pressures and avoiding the continued appreciation of the real exchange rate.” The rate of inflation can be expected to go up in September because of increased demand ahead of and during Eid-ul-Azha, the Metropolitan Chamber of Commerce and Industry said in an analysis yesterday.
High inflation has serious negative consequences.
It adversely affects poverty reduction and hurts the fixed income group. It keeps the domestic real interest rate needlessly high, and continues to appreciate the real exchange rate, thereby hurting exports.
In the latest report on Bangladesh, the World Bank said the central bank could be more ambitious in lowering the inflation target to below 6 percent.
Planning Minister AHM Mustafa Kamal released the inflation data yesterday.
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