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Posted: 2018-12-04 18:00:00

Inflation dropped to the lowest in 18 months in November on the back of a fall in non-food inflation.

Last month, inflation stood at 5.37 percent, down 3 basis points from October, according to the Bangladesh Bureau of Statistics. The last time inflation was this low was back in March 2017, when it stood at 5.39 percent.

“Headline inflation has remained stable,” said Zahid Hussain, lead economist of the World Bank's Dhaka office.

Inflation has been sliding for the last few months because of a decrease in food price, but November's decline was different: it was due to a decrease in non-food inflation.

Non-food inflation dropped 41 basis points to 5.49 percent in November, after climbing 45 basis points in October from a month earlier.

Since the exchange rate remained stable, non-food inflation dropped, said Planning Minister AHM Mustafa Kamal while unveiling the inflation data yesterday.

“The prices of all types of commodities are now stable. As a result, this fiscal year there is no risk of inflation going up.”

The government has targeted to keep inflation within 5.6 percent in fiscal 2018-19. In November, food inflation rose 21 basis points to 5.29 percent from the previous month. This was preceded by a decline of 34 basis points in October from that of the previous month. Food inflation has been falling continuously in the past couple of months.

About November's spike in food inflation, Kamal said, “It was due to rise in meat price.” Last month, the prices of lentil, khesari daal, Nazirshail and Minicate rice, mutton, soybean and palm oil were higher than a year earlier.

The prices of Nazirshail and Minicate rice increased 1.45 percent, soybean oil 1.27 percent and mutton 3 percent.

The increase in food inflation most likely came from non-rice items since the average price of coarse rice was 2.7 percent lower relative to October 2018 and 4.7 percent lower than in November 2017 due to bumper Aman harvests, Hussain said. “It could also be for supply chain disruptions due to bad weather and/or transport workers' strike.”

Non-food inflation cooled off most likely because of a slowdown in remittances, stability of the exchange rate and weaker private sector credit growth in November, he said.

The WB economist, however, went on to advice caution.

“Policy vigilance must be maintained to bring inflation down to levels comparable with competitor countries such as Vietnam and India.”

The inflation rate in Vietnam edged down to a seven-month low of 3.46 percent in November from 3.89 percent in October. In India inflation fell to 3.31 percent in October from 3.7 percent in September, Hussain added.

“The prices of food items are lower this year in comparison to last year,” Kamal said, while citing the rice price as a case in point. At this time last year the average rice price was Tk 54 per kilogramme (kg). Now, it is Tk 48 a kg.

The prices of commodities produced in the country and the imported ones are much lower now as well, he said.

This year, there has been a bumper production in the agriculture sector. On the other hand, the exchange rate in Bangladesh is much more stable than in many neighbouring countries. “As a result, the country is now in a low price regime, which will help contain inflation in future,” Kamal added.

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