Inflation: Demand or supply driven?

Bangladesh has been grappling with the problem of inflation for the last three years. According to Bangladesh Bureau of Statistics (BBS), headline inflation rose to 8.49 per cent in December 2025 up from 8.29 per cent in November 2025. Inflation remained stubborn for the second consecutive month. The average yearly inflation rate for 2025 stands at 8.77 per cent.

Bangladesh has overcome the dollar crisis due to high growth of remittance last year, adding to foreign exchange reserves and keeping the exchange rate stable throughout the year. There has been a relief in fuel prices. Moreover, the prices of rice, wheat, sugar, soybean oil and many other necessities have also gone down globally. But it is a matter of concern that the inflationary pressure continues to mount in Bangladesh amid this situation.

Since the problem of inflation cannot be tamed despite the contractionary monetary policy adopted by Bangladesh Bank, it implies that the monetary policy of raising interest rate to contain inflationary pressure is failing to deliver. Actually, it is not a demand-driven problem; rather it is a supply-driven one. One of the notable issues in this regard is a lack of proper market monitoring which is giving rise to the syndicate activities and making unscrupulous business groups more powerful to rig prices. Recent rise of LP gas price is allegedly an example of artificial price hike. The interim government should pay due attention to adequate market monitoring and take stringent actions against these dishonest businessmen to protect common people from the heat of chronic inflation.

Nafees Ahmed

Lecturer, Department of Business Administration

City University, Bangladesh