Inflation eases in August but stays above 10%

Inflation eased in August but remained at over 10 percent, as higher prices of goods and services continued to strain the purchasing power of consumers.

Last month, Consumer Price Index (CPI), which measures changes in the prices paid by consumers over time, stood at 10.49 percent, according to data released by the Bangladesh Bureau of Statistics (BBS) yesterday.

This is the second-biggest rise in the CPI of the last 13 years. It was 11.66 percent in July.

Besides, overall inflation in August stayed at more than 9 percent for the 18th straight month.

The dip could be ascribed to factors such as a normalising political landscape following the fierce nationwide anti-government campaign, blockade and curfew in July.

Besides, August saw a decline in extortions by ruling party men from food and vegetable-laden trucks coming to major cities, which, according to an economist, could be a reason for food inflation marking a significant drop.

In August, food inflation declined to 11.36 percent from 14.10 percent in July.

However, non-food inflation increased slightly to 9.74 percent from 9.68 percent in July, according to the state-run statistical agency BBS.

Average inflation over the past 12 months was 9.95 percent whereas 9.24 percent in the corresponding month last year.

Moderate inflation is a fact of life but high inflation rates badly hurt people with a fixed income, as purchasing power is lost faster. To tackle the brutal price pressure, many people are forced to chip away at their precious savings.

"August's inflation is still quite high," said Mustafa K Mujeri, executive director of the Institute for Inclusive Finance and Development, a non-profit institution.

Consumers' purchasing capacity has been eroding over the last two years, he said.

However, former lead economist of the World Bank's Dhaka office Zahid Hussain found the drop in price pressure inspiring.

"This is an encouraging news that food inflation declined in both urban and rural markets," he said.

"This is due mainly to a decline in extortion from food-laden trucks. But it may not last long," he said.

Meanwhile, Mujeri, a former chief economist at Bangladesh Bank, said the contractionary monetary regime and poor health of some banks might have contributed to the reining in of inflation.

Money supply to the market has been significantly constrained, he said.

"It will be premature to comment on the sudden drop in inflation…when the country just witnessed a decline in a single month," he added.

"We have to wait for some months to ascertain whether the downward trend has been sustained," he added.

Echoing the same, Hussain said the impact of monetary tightening on inflation was not visible yet because the tightening came after a lot of talks.

"We can hope to see better results on non-food inflation going forward," he said.

The new central bank governor is determined to hold on to the tighter stance until inflation starts to decline convincingly. The foreign exchange situation has also improved somewhat, he said.

"But it won't be enough to drastically reduce food inflation," he said.

Hussain thinks the impact of floods on food prices might transpire in September.

He said non-food inflation declined slightly in urban areas throughout August, perhaps reflecting demand compression due to disruptive demonstrations.

In August, non-food inflation in cities dropped to 9.20 percent from 9.43 percent in the previous month, as per the BBS data.

"We have to stop the resurgence of extortion and price gouging by big players in markets on essential food items," Hussain suggested.

The interim government, which came to power on August 8, has made combating inflation a priority.

On Thursday, Finance and Commerce Adviser Salehuddin Ahmed said the government has taken various steps and its outcome would be visible soon.

In this regard, the National Board of Revenue (NBR) has slashed duties on imports of onions and potatoes to boost supply and curb the rising prices of these essential items.