Inflation: target met

The government has comfortably met its inflation target in the just concluded fiscal year riding on depressed global commodity markets and prudent management of monetary policy.

At the end of fiscal 2014-15, the average inflation reached 6.41 percent -- the lowest in 11 years -- against the target of 6.5 percent.

In 2003-04, the country had seen inflation at 5.83 percent, according to the central bank. 

Planning Minister AHM Mustafa Kamal, while releasing the latest inflation data yesterday, said lower oil prices and a stable local currency helped meet the inflation target.   

The average food inflation was 6.69 percent at the end of the fiscal year, while non-food inflation stood at 5.98 percent. 

Inflation reached 6.25 percent in June, up by 6 basis points from the previous month, because of a hike in prices caused by increased demand on the occasion of Ramadan. Food and non-food inflation was 6.32 percent and 6.15 percent respectively in June.

Zahid Hussain, lead economist of the World Bank in Dhaka, said it appears that the stability of inflation has continued, helped by "soft global commodity prices and prudent management of domestic demand."

He said this is great news for the authors of the forthcoming Monetary Policy Statement from the central bank.

“The challenge for them is to ensure policy continuity on the inflation front. Perhaps time has come to think about nudging the economy towards a long run rate ranging between 5 percent and 6 percent,” he told The Daily Star. 

The government has set the inflation target at 6.2 percent for the new fiscal year that began last month. 

Food production has been upward over the last few years, which kept the prices under control, and imports also did not affect inflation as commodity prices remained stable, said Prof Shamsul Alam, a member of the general economics division of the planning commission. 

Alam hopes the government would be able to continue its success in inflation control in the current fiscal year. “It will, however, depend on the oil prices in the international market.”

Hussain of the WB also said the target for the current fiscal year "looks very achievable".  

Glencore, the world's largest publicly traded commodities house, also painted a weak outlook for raw material prices for 2015, saying supply of iron ore, oil and food commodities is likely to run above demand.

Glencore is expecting the period of low oil prices to continue.

Food and Agriculture Organisation's food index fell in January to a four-year low, down 24 percent from a record high set in 2011, after a crop failure tightened the market.

Strong crop yields, higher productivity and slower growth in global demand should contribute to a gradual decline in real prices for agricultural products over the coming decade, according to the Organisation for Economic Cooperation and Development, and the FAO.

The organisations said lower oil prices will contribute to lower food prices, by pushing energy and fertiliser costs down.

Crude oil prices dropped to as low as $43 a barrel in March this year before recovering to $57 of late, benefitting countries like Bangladesh, which are heavily reliant on energy imports.