Monetary expansion prompts inflation to keep raging

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Jasim Uddin Haroon
The point-to-point inflation has continued to increase significantly to hit 7.24 per cent with the food inflation reaching nearly double digit in urban areas, officials said Monday.
The food inflation in urban areas reached 9.83 per cent during the period against 6.48 per cent in the same period in 2008.
Economists said that the country's inflation has been surging significantly in recent months as a result of the long-term consequence of continuing monetary expansion.
"We've been observing that monetary expansion is growing on an average 19 per cent and this is playing a major role in the rise of inflationary pressure," Dr Zaidi Sattar, chairman of Policy Research Institute, a local think tank, told the FE.
Dr Mustafizur Rahman, executive director of the Centre for Policy Dialogue (CPD) said: "This a real picture of the rise of prices in the domestic market. The prices of rice and pulses have been continuing to rise in the domestic market."
He also said the international prices of commodities have been influencing the domestic prices despite the fact that the local agricultural production growth remained buoyant.
However, national food inflation stood at 7.84 per cent against 6.68 in November in 2008.
In economics, point-to-point inflation is a gauge, which compares the price rise of a said period against the previous year's.
The national non-food inflation increased to 6.44 per cent in November against 5.25 per cent in the same period in 2008.
The non-food items consist of transportation cost, house rent, utilities and other things.
In rural areas, food inflation witnessed inflation at 7.0 per cent while non-food inflation at 6.51 per cent in November.
In urban areas, food inflation significantly increased 9.83 per cent. This is a sharp rise in more than one year.
But the non-food inflation in urban areas remained slightly lower than in rural areas. It was 6.27 per cent in urban areas.
Dr Zaidi said a robust growth in the remittance inflow is also contributing to the country's inflation leading to an unbearable situation for the low-income group of society.
"We think that higher remittance growth which creates money in the market is also contributing to the higher inflation," Mr Zaidi added.
In economics, inflation is a rise in the general level of prices of goods and services in an economy over a period of time.
When the price level rises, each unit of currency buys fewer goods and services; consequently, inflation is also an erosion in the purchasing power of money - a loss of real value in the internal medium of exchange and unit.