Analysts blame rising consumer prices on bad roads and a lagged effect of monetary expansion
Inflation accelerated faster in urban areas than in rural settings in July, partly because battered roads disrupted the supply chain, analysts said yesterday.
The analysts also linked the jump in consumer prices to a lagged effect of high monetary expansion.
In urban areas, overall inflation increased 2.32 percentage points to 10.65 percent in July, compared to June. In rural areas, overall inflation increased 0.18 percentage points to 11.09 percent in July, compared to the previous month, the Bangladesh Bureau of Statistics said in a statement yesterday.
Food and non-food inflation rates accelerated faster in urban areas than in rural settings in July, compared to the previous month, data from the statistical agency shows.
In rural areas, food inflation remained the same in June and July, while non-food inflation rose by 0.45 percentage points.
But the situation was different until May when inflation increased more in rural areas than in cities.
Zahid Hussain, senior economist of the World Bank, said monetary expansion was excessive in the last fiscal year and its lagged effect might have been felt on non-food inflation in urban areas.
“If monetary expansion is very high, its effect is delayed by about four to five months,” Hussain said.
Food prices in urban areas increased in July after bad roads disrupted the supply chain, Hussain said, adding that the road communication worsened further due to persistent rains l in the last few weeks.
A high official of Bangladesh Bank said the private sector credit growth crossed 29 percent last year. Its effect may be felt on non-food inflation.
The official said the central bank from the middle of the last fiscal year took steps to rein in credit expansion to achieve high growth and keep the effect of inflation at a tolerable level.
Another high official of the central bank said they always advised the government to remain alert so that the supply side is not affected.
The appalling condition of the road networks has badly affected movement of commodities, the official said. As a result, prices of various food items shot up in urban areas.
Nationally, the overall inflation was 10.96 percent in July, which was 0.79 percentage points higher than in June.
-With The Daily Star input