Despite some positive forecasts made by the multilateral lender, the Asian Development Bank (ADB), in April last that inflation rate in Bangladesh might decline to 8.0 per cent in the fiscal year, 2025-26, things did not turn out that way. The ADB's positive outlook might have emerged from the fact that the general inflation, though rather high in April 2025 at 9.17 per cent, did decline markedly from the previous month by 0.18 percentage points driven mostly by a fall in both food and non-food inflation. However, the general point-to-point inflation, according to Consumer Price index (CPI) and Wage Rate Index (WRI) report, reached 8.58 per cent in January 2026 (rising slightly from 8.49 per cent in December 2025) marking a third consecutive monthly increase and the highest rate in eight months since May last year.
This rise in inflation, driven primarily by a surge in food inflation reaching 8.29 per cent in January 2026 up from previous month by 0.58 percentage points, has been obtained according to the latest Bangladesh Bureau of Statistics (BBS) data. However, non-food inflation has meanwhile shown a positive trend of decline since December last year. But why is this sustained rise in inflation despite the aggressive contractionary monetary policy pursued by the central bank over the past three years that has raised policy rate from 6.0 per cent to 10 per cent under the interim government? The latest rise in general inflation, however, has been attributed to the usual price hike of foodstuff ahead of the holy month of Ramadan, a situation further compounded this time by the increased cash flow in the market, thanks to the supply-side bottlenecks having to do with the election-related spending. Add to this the higher-than-average rise in price in the non-food category of housing, gas, recreation, etc., the overall inflation picture comes clear. Economists hold that the inflationary pressures are being caused both by demand and supply side factors.
On the supply side, for instance, the severe Liquefied Petroleum Gas (LPG) and natural gas crises that hit the country last month naturally raised cost in the energy-dependent sectors. On the demand side, as noted in the foregoing, the economy saw a boost in election-related consumer expenditure. To make the matter worse, there has been no improvement in the supply chain inefficiencies, weakness in market management and product marketing structures. The bottlenecks included insufficient distribution, high transport costs and market syndicates behind supply shortages of essential commodities. Experts have pointed to the fact that though in the farming sector farmers usually get a raw deal when it comes to selling their produce in the market (as the prices are often below the production cost), still the consumer prices remain high! How is one to explain this dichotomy? This is a structural issue that monetary policy alone cannot answer, economists hold. That is why they often recommend reforms in the market management, supply chains, import regulation and competition.
Since the tenure of the interim government is over, it would be the task of the next elected government to focus on market management, increasing production and investment as well as employment generation. These measures would go to ease inflationary pressure on the economy. Otherwise, there is the risk of ongoing phenomena of continued rise in food prices with the attendant fall in the real incomes as a double whammy for the ordinary citizens. In this connection, the WRI repot that the income of the wage earners has increased by 8.08 per cent is but cold comfort for the working class, since the rise in their wages is offset by the higher rate of inflation. In fact, there is no respite in the erosion of their purchasing power, i.e., real income.
