Inflation jumps to 8.78% in February

The point-to-point inflation, which has been on the decline with some fluctuations after hitting a decade-high in August last year, rose 0.21 percentage points to 8.78% in February, according to the latest data, although commodity prices in many parts of the world are continuing to fall.

The overall inflation rate has now stayed above 8% for the past seven months despite the fall, causing significant discomfort for consumers.

Economists believe that lower and middle-income families will suffer more in the upcoming fasting month of Ramadan due to the increased inflation as prices for essential goods like flour, edible oil, sugar, spices and many others reached an intolerable level.

"The tolerance of inflation varies from country to country. Many nations, including Turkey and the Latin American countries, can endure double-digit inflation. But the case is different for Bangladesh. Our inflation is not tolerable, particularly for those having lower earnings," said Dr Mustafa K Mujeri, former director general of Bangladesh Institute of Development Studies.

"The prices of commodities, especially food products, will increase further during Ramadan and they will go beyond the purchasing power of the poor. There is no sign of inflation rate easing in the coming days," he told The Business Standard.

"Again, the global situation as well as the local situation may deteriorate further. So, necessary measures are imperative to ensure food security for low-earning groups," he added.

In urban areas, the overall inflation rate increased to 8.75% in February from 8.39% in the previous month. The food price index rose to 7.98% from 7.41% while the price index of non-food items jumped to 9.61% from 9.48%.

In rural areas, the overall inflation rate increased to 8.80% in February from 8.67% in January. The food price index hiked to 8.19% from 7.92% during the period while non-food items fell to 9.98% from 10.12%.

Bangladesh's inflation is in stark contrast to many other parts of the world, including the war-affected European countries and the United States, where inflation has been falling substantially.

The United Nations index of food-commodity costs also shows a decrease of 0.6 percentage points in February. It was down for the 11th month, which is the longest run of fall reported in the last three decades.

For example, the global price of wheat dropped below $8 per bushel in mid-February, but the local market prices of the cereal did not see a decrease. Even prices for wheat flour increased by over 51% year-on-year in the last few months. Flour is now selling for Tk68 per kilogram. Similarly, global commodity market prices for soybean oil and crude oil have dropped to pre-war levels, but prices in Bangladesh have not followed suit.

State Minister for Planning Shamsul Alam, however, believes that Bangladesh inflation is yet to reach an uncomfortable level.

Referring to examples of Zimbabwe and Pakistan, which see 300% and 40% inflation respectively, he said, "We have inflation caused mainly by higher production costs, but the inflation is not at hyper-level. Even India's inflation is higher than ours."

After a meeting of the Executive Committee of the National Economic Council on Sunday, he said, "Although inflation increased in February, reporting at 8.78%, a downward trend prevailed in the last few months."

Shamsul Alam also claimed that the national wage rate has increased more in comparison to the rise in inflation. "The national wage rate has risen by 26% in recent times, which helped prevent inflation from reaching an uncomfortable level."

Consumer inflation is calculated taking prices of over 400 products into consideration, the state minister explained and noted that the surge in inflation came from price hikes of a few products, while prices of many others products have been on the fall.

The overall inflation rate reached its highest point in a decade in August last year, at 9.52%. However, the rate has steadily decreased over the past few months, reaching 8.91% in October and continuing to drop in the following months. 

In January, the food price index dropped to 7.76% from 7.91% in December, while the price index for non-food items fell to 9.84% from 9.96% during the same period.