The Bangladesh Bank is hopeful of the possibility of steep inflation losing steam in the near future following tight monetary policy stance coupled with the government’s fiscal austerity.

The average inflation was around 9.5 per cent during the first five months of this fiscal, leading to price hikes. The 12-month average headline inflation exhibited a gradual increase, reaching 9.29 per cent in the first quarter (Q1) of fiscal 2023-24 (FY24), up from 9.02 per cent in Q4 FY23.

However, core inflation (excluding food and fuel) cooled to 6.82 per cent in Q1 FY24 from 7.77 per cent in Q4 FY23.

"As higher inflation remained a challenge for Bangladesh economy, current monetary and fiscal policies have provided topmost priority to containing the inflationary pressure," the central bank noted in its latest quarterly report for July-September.

All policy initiatives by the central bank and the government signal anchoring the inflation expectation and are expected to have favourable impact on inflation outcome in the coming period, the report noted.

Macroeconomic challenges include current account deficit, higher inflationary pressure and lower resource mobilisation.

"A significant reduction in government expenditure and substantial revenue collection resulted in a budgetary surplus of BDT 71.0 billion by the end of the first quarter of FY24 (July-September-2023)," it said.

The recent depreciation of the taka against the US dollar continued to exert pressure, domestic media outlets reported citing the quarterly document.

Apart from continuously increasing the repo rate to fight inflation, the central bank has stopped lending to the government by increasing reserve money, it added.

Fibre2Fashion News Desk (DS)

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