Core inflation keeps on rising in recent months (The Financial Express (Bangladesh))

The central bank bolstered monitoring of the key economic indicator as core inflation kept rising in recent months, climbing to 7.37 per cent in July, officials said.

A month before, in June, the rate of inflation was 6.74 per cent. And it was 6.37 per cent in May. The Bangladesh Bank’s latest statistics revealed the incremental rise in the core inflation that prompted the BB authorities to go on alert about the situation.

Currently, the BB is measuring the core inflation that excludes non-food and non-fuel components from consumer price index (CPI).

The prime objective of computing core inflation is to separate out the components of headline inflation, officially known as general inflation, which is caused by non-monetary events as these price changes do not reflect the impact of underlying monetary policy decisions.

The central bankers noted with concern the upturn in inflation on point-to-point basis, as they fear the inflation as measured by CPI on 12-month average may turn into an upward trend from the existing downward level if the rising trend on point-to-point basis continued.

As measured by the CPI barometer, the inflation in the country rose to 6.36 per cent in July last on point-to-point basis from 6.25 per cent in the preceding month. It was 6.19 per cent in May 2015, according to Bangladesh Bureau of Statistics (BBS) data.

The point-to-point CPL inflation increased during the period under review following a rising trend in non-food inflation, the BB officials explained.

“Point-to-point non-food inflation increased to 6.80 per cent in July from 6.15 per cent of the preceding month, mainly on clothing and footwear, furniture furnishing and others, medical care and health-related expenses, transport and communications and miscellaneous goods and services,” the central bank said in a research report.

On the contrary, it added, point-to-point food CPI inflation decreased to 6.07 per cent in July from 6.32 per cent of the previous month.

The report also says the CPI inflation on the basis of 12-month average continued on its downturn since June 2014, edging down to 6.35 per cent in July 2015 from 6.40 per cent in June.

Average food inflation declined to 6.53 per cent in July from 6.68 per cent a month ago while average non-food inflation increased to 6.08 per cent from 5.99 per cent.

“We’re now monitoring the overall inflationary pressures on the economy closely aiming to bring down the inflation to 6.2 per cent on 12-month average basis by the end of this fiscal year (FY), 2015-16, from the existing level of 6.35 per cent,” a BB senior official told the FE.

Currently, the central bank monitors the 12- month moving average of CPI inflation in defining the underlying trends that average out the short-term or transitory components (seasonal impact) in the CPI.

The BB may use its monitory instruments to contain the inflationary pressures on the economy after watching the overall inflation situation closely over the next couple of months, the BB official hinted.

In South and Southeast Asia, many countries, including Pakistan, the Philippines, Sri Lanka and Thailand, regularly publish and monitor developments on core inflation.