Inflation eased in February but remained above the 9 percent mark for the 24th straight month as the rising prices of goods and services continue to erode consumers’ purchasing power.
Last month, the Consumer Price Index (CPI), which measures changes over time in the prices paid by consumers, dropped to 9.32 percent from January’s 9.94 percent, according to data released yesterday by the Bangladesh Bureau of Statistics (BBS).
For all latest news, follow The Daily Star’s Google News channel. Inflation has persisted above 9 percent since March 2023.
Last July, consumer prices witnessed the sharpest jump in 14 years, hitting 11.66 percent, data from the statistical agency showed.
The latest drop was mainly driven by a reduction in food inflation, which stood at 9.24 percent in February, down from 10.72 percent the previous month.
However, non-food inflation showed an upward trend, increasing to 9.38 percent in February from 9.32 percent in January, indicating that services continue to put pressure on household budgets.
“The easing of inflation reflects the increased supply of commodities in the kitchen market,” said Prof Selim Raihan, executive director at the South Asian Network on Economic Modeling, a think tank.
The availability of winter vegetables and certain spices has played a positive role in the commodity market, contributing to reductions in food inflation, he said.
“This situation clearly shows what we have been saying for a long time—that supply-side issues are a major driver of our inflation,” Raihan said, adding that such problems could not be addressed solely through monetary policy.
However, he remained unsure about the trend, saying inflation above 9 percent is still very high.
“I am still not confident that inflation has declined due to policy measures. The seasonal effect will fade, and prices may rise again,” he said.
“Once the seasonal supply diminishes, market prices will increase unless we address the fundamental causes of inflation and ensure proper coordination between monetary policy, fiscal policy, and market supply,” he warned.
According to Raihan, the decline in inflation has been marginal.
“If you look at major commodities such as rice, lentils, oil, chicken, beef, and fish, prices have not decreased. In some cases, they have even increased,” he said.
“From this perspective, I am not confident that we are taking enough steps to combat inflation.”
However, Ashikur Rahman, principal economist of the Policy Research Institute of Bangladesh, believes that the government’s contractionary monetary policy has played a role in this reduction.
“The contractionary monetary policy, along with a significant jump in imports, has played a role in easing inflation,” he said.
There was a significant increase in imports during December and January, he said, adding that the relaxation of import policies over the past three months has shown good results, reducing supply chain disruptions.
“Now, Bangladesh Bank may not have strong justification to further raise policy rates. If this trend continues, we might see a slight reduction in the policy rate by June,” he said.
Currently, the policy rate stands at 10 percent. In the last monetary policy statement, the central bank refrained from any further hikes after witnessing a declining trend in inflation since December.
However, Rahman warned that electricity supply remains a major challenge ahead.
“If the electricity supply remains stable and agricultural output performs well, keeping inflation below double digits would be a positive outcome.”
So, the government needs to effectively manage supply chain disruptions and ensure stability in the power sector to improve the overall situation, he said.