Inflation cooled down in February, attributed to the restoring supply chain with the political situation becoming normal.
But economists warned inflation, particularly non-food, might pick up further once the planned power tariff hike is announced.
Official data released in Dhaka yesterday showed the overall inflation fell to 7.44% in February, down from the previous month’s six-month high of 7.5%.
The fall came for the first time in three months since November in 2013 and despite that the rate still remains well above the target of 7%.
But food inflation rose to 8.84% from January’s 8.81% while non-food inflation, which includes house rent and transportation, came down to 5.37% from 5.53%, according to Bangladesh Bureau of Statistics (BBS).
Food inflation increased both in rural and urban areas as well during the month with non-food variety had dropped in both the areas.
Surging rice price measuring 30% in February compared to the corresponding period a year earlier has contributed to increase in food inflation, according to economists.
“Improved supply chain helps ease inflation,” said BBS Director General Golam Mostafa Kamal. But higher cost of food production increased food prices, particularly rice, pulse, flour and milk, he added.
The country saw a series of shutdowns leading up to the national election held on January 5 caused severe supply disruptions, sending food inflation especially in urban areas higher.
About crossing fiscal target of inflation, BBS chief said: “The government target is not monthly target, rather yearly average target. So if the inflation keeps falling in the months ahead, the average inflation might be around 7%.”
The BBS data showed that overall inflation in rural areas slipped to 7.17%, down from 7.24% in the previous month, but in urban areas it was 7.84% from 7.97% during the period.
Zaid Bakht, research director at the Bangladesh Institute of Development Studies, said it is definitely smooth supply chain in the last month that helps bring down the inflation rate. But power tariff hike might fuel inflation as it will push production cost up, he warns.
Power Development Board (PDB) and West Zone Power Distribution Company (WZPDC) last week proposed increasing electricity tariff by 15.5% and 8.59% respectively to help them cut increasing losses.
In response, the technical committee of the Bangladesh Energy Regulatory Commission said the regulator might consider increasing the retail tariff by 6.66% on average for PDB customers and 7.51% for WZPDC customers.