Inflation snaps declining streak, rises to 8.55% in July

Highlights

• Inflation was 8.48% in June
• Central bank targets to keep inflation within 6.5% by end of FY26
• Non-food inflation slightly up to 9.38% from 9.37%

Bangladesh's inflation edged up to 8.55% in July, breaking a three-month easing streak, driven by simultaneous hikes in both food and non-food prices, according to the Bangladesh Bureau of Statistics (BBS) data released today.

Before the latest uptick, inflation had steadily declined – from 9.35% in March to 9.17% in April, 9.05% in May, and 8.48% in June. The inflation rate in July 2024 was 11.66%.

Meanwhile, the central bank set a target of containing inflation within the 6.5% ceiling for FY26.

Food inflation rose to 7.56% from 7.39% in June – reversing a seven-month downtrend – while non-food inflation was slightly up to 9.38% from 9.37%. Although food prices remain below the record 14.10% seen in July 2024, the reversal hints at renewed pressure on household budgets.

BB data shows inflation rose in both urban and rural areas.

Policy rate won't help, supply issues behind inflation: Experts 

Mustafa K Mujeri, executive director at the Institute for Inclusive Finance and Development (InM), said the Bangladesh Bank raised the policy rate to 10% to curb inflation, but it hasn't worked. 

He said monetary tightening only suppresses demand. But with a stagnant economy, declining incomes, and rising unemployment, demand is already low. High inflation over the past three years has eroded purchasing power, so further demand contraction won't help.

He added that the main driver of inflation is supply-side issues. 

"For instance, despite a bumper Boro harvest and rice imports, rice prices continue to rise, even though there's no shortage. Rice has a heavy weight in the inflation basket, so if its price increases, inflation won't fall. The same goes for other essentials—the real problem lies in weak market management.

"Unless supply chain disruptions, market manipulation, and extortion are strictly addressed, inflation will not come down. When inflation showed a slight decline, the government claimed it would continue decreasing — but now it's moving in the opposite direction," he said.

"We've consistently said this decline wasn't policy-driven but due to market fluctuations. Inflation has not been tackled at its root. This will persist until a comprehensive policy is adopted. The Bangladesh Bank's monetary policy must be coordinated with supply-side and market management strategies," Mujeri added.

Mustafizur Rahman, distinguished Fellow at the Centre for Policy Dialogue (CPD), said inflation has started to decline, dropping below 9% when compared point-to-point with July last year, which is positive. However, price levels remain high due to prolonged inflation in recent years, weakening people's purchasing power.

He noted that inflation still outpaces wage growth, affecting low- and lower-middle-income groups. He stressed the need to boost investment and create decent jobs to raise incomes.

Real income has been falling for 3.5 years

For three and a half years, wages in Bangladesh have consistently lagged behind the rising cost of living, eroding the real income of workers month after month.

In July, average wages for low-paid skilled and unskilled labourers rose slightly to 8.19%, up from 8.18% in June, according to the BBS data.

But inflation climbed faster, reaching 8.55% in July. That leaves workers once again falling behind – extending a streak of declining real incomes to 42 consecutive months since February 2022.

A year ago, in July 2024, inflation had surged to 11.66% while wage growth remained stuck at 7.93% – a painful 3.73 percentage point gap. Now, that gap has shrunk to only 0.36 percentage points.

However, the narrowing gap between wage growth and inflation offers only a vicarious sense of relief, as it reflects a slowdown in inflation rather than any meaningful improvement in wages. The burden on households remains.

Mustafa K Mujeri said, "When the rate of wage growth consistently falls behind the rate of inflation, it means their real income is declining."

He further explained, "Whenever wage growth lags behind inflation and this trend continues over time, the purchasing power of low-income people keeps shrinking. As a result, their standard of living deteriorates."

This deterioration has real consequences. "They are no longer able to buy the amount of food they need – or are forced to buy less. This leads to undernutrition, which will lead to a rise in healthcare expenses," he said.

"If this situation persists, the number of poor people in the country will increase", he warned.

Meanwhile, sectoral data showed wage growth slowed in both agriculture (8.37% in July, down from 8.40% in June) and services (8.40%, down from 8.43%), while industry saw only a marginal improvement (7.91%, up from 7.87%).

Division-wise, gains were limited to Dhaka and Chattogram, with wage growth falling in all other divisions.

The BBS tracks these changes through its Wage Rate Index (WRI), which monitors wage trends across 63 occupations, including 17 in agriculture, 30 in industry, and 16 in services