Straight 13 months' monetary and fiscal combat by Bangladesh couldn't tame an inexorable inflation below 9.0 per cent rather the rate heads for double-digit club after fresh price spirals in March, analysts say.
The higher inflationary pressure has already hit hard middle- and lower-middle class and poor people as their expenditure for buying necessaries is eating up the lion's share of their wages and monthly incomes, they said Wednesday in their analyses.
Regulators appear to be in a double bind in inflation-control battles by way of interest-rate rises and tightened exchange-rate regime.
Economists, as such, feel it is hard to tame the inflation without stabilizing the exchange rate and proper interest-rate management.
The inflation rate on a point-to-point basis jumped again in the last month, March, signalling a tantrum of touching the double-digit rate as the prices of essential commodities, including rice, meats, fishes, vegetables and cooking oils, are still high in the kitchen markets.
Latest Bangladesh Bureau of Statistics (BBS) data show that the inflation in March boiled up to 9.81 per cent from 9.67 per cent in the previous month, February.
It has found inflation on both food and non-food accounts having been maintaining a higher trend over the months, upending government measures to relieve price pressures on the consumers for more than a year now.
According to the BBS, the inflation rate on account of food items on a point-to-point basis almost touched a double-digit high at 9.87 per cent in March, a 0.43-percentage-point rise from that of 9.44 per cent in February last.
Moreover, the inflation in non-food items also bit the people as it was recorded higher by 0.31 percentage points to 9.64 per cent in the past month than 9.33 per cent in February, the official data showed.
Following the Russia-Ukraine war and some other internal factors, inflation suddenly jumped to 9.0-percent club 19 months ago in August 2022 from the long-maintained 6-7 per cent bracket in the previous period.
The central bank's tight monitory policy has also failed to cool the higher trend of the consumer price index (CPI) although it eased in different neighbouring countries, including India, Sri Lanka, Afghanistan, and Bhutan.
Bangladesh's inflation suddenly swelled by 1.74 percentage points in a single month to 9.52 per cent in August 2022 from a 7.78- percent rate in the July same year, the BBS data showed.
After maintaining higher rate in two consecutive months the inflationary pressure went down to 8.91 per cent in October 2022. The inflation had maintained the rate within 8.0- percent trajectory in the consecutive five months up to February 2023.
However, prices of the essential items in the markets heated up again which inflated the inflation rate to the nine-percent club again in March 2023.
A year ago in March 2023, the rate rose to 9.36 per cent, which is still persisting in almost double-digit trajectory.
In October 2023, the point-to-point inflation swelled to 9.93 per cent and the rate had been persisting in the higher trajectory for the last six months up to March this year, the BBS data showed.
Policy Research Institute (PRI) Executive Director Dr Ahsan H Mansur feels it is hard to bring down the inflation until the exchange rate is stabilized.
"When you have a volatile currency-exchange rate, pressure on balance of payments (BoP), fragile interest -rate management, higher government expenditure against lower revenue growth, then it will be difficult to curb the inflationary pressure," he told the FE.
Dr Mansur says the central bank applied improper method - SMART -- regarding the interest- rate policy in July last year.
"The Bangladesh Bank has taken the backward-looking interest-rate-average (SMART) for setting bank interest rate. However, we need forward-looking interest-rate policy like other global economies," he adds.
"So, this interest rate has failed to impact positively Bangladesh's higher-inflation trajectory," the economist concludes on what he thinks have gone wrong on the policy front.
Another young economist, Dr Masrur Reaz, says when the global headline inflation started going down last year, 2023, amid price falls of different products, including food and oils, Bangladesh has failed to catch up with the opportunity.
"The central bank partially opened up the interest rate in July last year which was late. It devaluated the local currency against USD nearly 31 per cent over the period which made the imported raw materials costly. Therefore, the finished products in local markets become costly, resulting in higher CPI," he adds.
In addition, the BB printed nearly Tk 1.0 trillion worth of new notes and supplied those to the economy afresh, which aggravated the inflation further, Dr Masrur says in his analysis on this macroeconomic concern.
He suggests that the government should stabilize the exchange rate, avoid contradictory monetary policy and cut public expenditures for taming the long-lasting inflation.
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