No respite to consumers: Inflation edges up in March

Inflation edged up in March after marginally easing in the previous month, showing no signs of respite to consumers already hurt by the consistent erosion of buying capacity due to elevated prices. 

In March, inflation, a measure of the increase in the prices of a basket of goods and services over a period, rose 9.81 percent, compared with 9.67 percent in February, as prices of both food and non-food items increased, according to data released by Bangladesh Bureau of Statistics today.  

In March, prices of rice, potatoes and pulses surged, eroding the purchasing power of low-income and poor people who spend half of their income on food. 

Nationally, food prices grew 9.87 percent in March. In February, the rate was 9.44 percent. Non-food prices also rose at a higher pace in March than in the previous month.  

With the spike in prices in March, annual average inflation is expected to register another round of increase from 9.6 percent recorded in February, indicating that the tight monetary policy pursued by Bangladesh Bank is yet to impact the market. 

"The monetary policy response under the SMART (six-month moving average rate of treasury bill) framework is too weak to be adequately responsive," said Ashikur Rahman, a senior economist at the Policy Research Institute of Bangladesh, a think-tank.

"Moreover, given the policy rate of 8 percent remains below the current rate of inflation, the monetary policy is not having its desired effect." 

Rahman said it is also necessary to factor in the pattern that domestic consumption generally spikes during Ramadan, which could have contributed to inflation not cooling.  

"As a whole, it looks very likely that Bangladesh Bank will miss its target of substantially reducing inflation by June 2024 unless more decisive action is taken on the monetary front," he said. 

In a report last week, the World Bank said inflation remained elevated in the first half of the current fiscal year, driven by rising food and electricity prices. 

"High inflation has halted poverty reduction. Higher food prices particularly impacted poor households, which allocate over half of their budget towards food expenditures," it said. 

With inflation remaining above 9 percent persistently for more than a year, the government earlier revised the upward inflation target to 7.5 percent for fiscal 2023-24. 

The World Bank said around 5 lakh people in Bangladesh likely fell into extreme poverty between the fiscal years 2022-23 and 2023-2024 due to the erosion of purchasing power. 

In addition, 8.4 lakh people are projected to join the ranks of the moderately poor, who earn $3.65 a day in purchasing power parity, according to the World Bank.