The central bank will soon conduct a survey on inflation expectation aiming to help the financial sector players and investors frame proper policies and draw up investment plans, sources have said.
The inflation expectation is a rate of inflation that workers, businesses and investors think will prevail in the future, and will therefore matter in their decision-making.
Various developed and developing countries conduct such surveys quarterly to have knowledge about the trends of future inflation. A central bank's ability to anchor inflation expectation is being considered as an important measure of the success of a monetary policy.
"In Bangladesh usually the rate of inflation is being calculated based on statistics of previous months. But now we are going to conduct a survey to get an idea about what the rate of inflation can be in the future months or quarters," Bangladesh Bank (BB) general manager Shahidul Alam told the FE.
He said framing an appropriate policy and drawing up an investment plan would be easier for the people involved in the financial sector, if they can get an idea about the probable rate of inflation.
Mr Alam said various developed and developing countries including Japan, India, Thailand and New Zealand conduct such inflation surveys.
He said through the survey it would be known that in which range the people were expecting the inflation.
The BB will conduct the survey for the first time in the country under a project funded by the Asian Developed Bank.
Chief consultant of the project Chee Cung and survey expert Dr Abul Basher, a research fellow at the Bangladesh Institute of Development Studies (BIDS), will help the central bank carry out the task in one year.
"Once our officials can acquire the necessary expertise, then the central bank will take over the project and do it by its own manpower," said Mr Alam. Under the project the core team members of the Project Implementation Unit of the BB will be given training in central banks of India or Pakistan to get knowledge on how to conduct an inflation expectation survey.
The survey will be conducted involving 1,000 people in six divisions. People will be selected based on the framework the BBS follows in its household survey. A questionnaire has already been prepared to conduct the survey.
Chairman of the Department of Economics at the University of Dhaka, Prof M A Taslim, talked to the FE on it Friday. According to him, inflation expectation determines the actual inflation on a large scale. But if the expectation remains high, the actual inflation may go up.
"Inflation expectation works like a spiral. Once it starts rising, it continues," he said adding that because of that the country's central bank tried to keep the inflation at a low level.
Mr Taslim said the inflation expectation is one kind of prediction made based on past experiences and present trends of prices and other factors.
He said businessmen set prices of their products without knowing the expected inflation. If the inflation expectation is found higher, they may further raise prices of their products.
"It can't be assumed how accurate the inflation expectation will be. But, such an initiative is welcome," he said on the central bank's move to conduct a survey on inflation expectation.
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