Bangladesh’s pace of inflation, which had accelerated between July and October of last year for crop damage from flood, slowed further in January, falling comfortably within the central bank’s target of 5.4 per cent.
The consumer price index recorded an annual growth rate of 5.02 per cent in January, down from 5.29 per cent in the previous month, largely due to a slowdown in the increasing cost of everyday food staples thanks to the arrival of winter vegetables and the leisurely revival of demand for non-essentials.
“The current trend of inflation is a good sign,” said Planning Minister MA Mannan while unveiling the monthly CPI data on Wednesday.
The disclosure comes as the central bank on Tuesday in its revision to the monetary policy statement said inflation would remain within the target for the rest of the fiscal year.
Last month, food inflation declined 11 basis points to 5.23 per cent from December of last year. One basis point is one-hundredth of a percentage.
Non-food inflation dropped 52 basis points to 4.69 per cent in January.
Inflation in rural areas declined to 5 per cent in January from 5.28 per cent in December last year and in urban areas 26 basis points to 5.05 per cent.
“It is good that the inflation rate has remained below the government target,” said Zahid Hussain, lead economist of the World Bank’s Dhaka office.
The inflation declined mainly due to weak demand as people are yet to fully recover their income from the pandemic shock.
Millions lost work or wages during the pandemic and the resulting lockdown and struggled to afford basic foodstuffs such as vegetables and pulses.
“People do not have the purchasing capacity as before.”
There is a perception that excess liquidity in the banking sector may push inflation up but it has not happened yet as the demands for credit is almost absent, he added.
At the end of December last year, the banking sector had excess liquidity amounting to Tk 204,700 crore, which is the biggest in at least the past two years, according to data from the Bangladesh Bank.
Private sector credit growth stood at 8.37 per cent in December last year, which is way below the central bank’s target of 14.8 per cent for fiscal 2020-21.
The prices of edible oil and rice are still high, said Ahsan H Mansur, executive director of the Policy Research Institute.
“This is a burden for the low-income group as their income is still low.”
The pandemic’s impact on peoples’ income and jobs persists, which is hindering normal living compared to pre-pandemic levels, he added.
