Urban consumer prices up in Aug

Inflation rose in urban areas last month partly because of supply chain disruptions due to floods.

The overall inflation in urban areas stood at 7.15 percent at the end of August, up from 7 percent a month earlier, according to Bangladesh Bureau of Statistics.

Food inflation contributed to the rise in overall inflation in urban areas, as it climbed 28 basis points to 6.39 percent. Non-food inflation, however, rose 1 basis point to 7.99 percent.

In rural areas, inflation declined 13 basis points to 4.41 percent last month. Food inflation declined 19 basis points to 3.4 percent, while non-food prices increased 2 basis points to 6.28 percent last month.

The intensity of flood and rains appeared to be higher this year than in the past few years, disrupting the supply chain of food items such as rice and vegetables, said Zahid Hussain, lead economist of the World Bank's Dhaka office.

The price of staple rice rose as much as 8 percent in Dhaka city markets, according to data from the Trading Corporation of Bangladesh.

However, the overall inflation at national level continued to fall for the second month and stood at 5.37 percent in August, down from 5.4 percent a month earlier.

The declining trend is giving the government much confidence that it would be able to keep the inflation rate within the target of 5.8 percent this fiscal year.

Steady commodity prices in the international markets and a declining remittance contributed to the downward trend, Hussain said.

Remittance dropped 15 percent in the first two months of the fiscal year from a year earlier, according to Bangladesh Bank data.

The overall 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. It was 7.28 percent even in July 2014.

In its latest monetary policy, the central bank said a further decline in inflation owing to lower fuel and commodity prices may not be strongly ascertained.

“However, the inflation rate is now in a safe zone.”

The forecast by the BB team finds an inflation rate of 5.45 percent in December 2016. This forecast, however, does not incorporate other external shocks.

An inflation-expectation survey conducted by the BB provides the central bank with two figures: 6.35 percent by general people and 5.90 percent by professionals.

“All these numbers indicate that inflation will centre around 6 percent, which is quite moderate for a developing economy like Bangladesh,” the central bank said.