Despite the central bank formulating a contractionary monetary policy for four years to control high inflation, it has not been successful. Although inflation has been reduced slightly compared to the last few years, it still remains much higher than that of other South Asian countries. The average inflation in the FY 2025-26 was 8.68 percent, according to data from the Bangladesh Bureau of Statistics (BBS). In June, the point-to-point headline inflation was 9.16 percent, which is 0.68 percent higher than in June 2025. In June of that year, inflation was 8.48 percent.
After the fall of the Awami League government in the 2024 mass uprising, the interim government took initiatives to curb inflation upon assuming responsibility. The policy interest rate was raised to 10 percent to bring down inflation. In August of that year, inflation was 10.49 percent. Despite inflation remaining above 10 percent for five months of that year, it dropped to 9.94 percent in January 2025. After trending downward for several consecutive months, it began to rise again in November. Most recently, it reached the 9 percent range again in February. Inflation was 8.58 percent in January of this year, followed by 9.13 percent in February, 8.71 percent in March, 9.04 percent in April and 9.42 percent in May.
Bangladesh Bank’s monetary policy has little impact on controlling inflation, according to economists and bankers. They state that the announced monetary policy is failing to play any significant role in controlling inflation. The targets set in the monetary policy are also not being achieved. The government must now take the lead role in controlling inflation and increasing the flow of credit to the private sector.
Toward the end of the FY 2025-26, specifically in April, the Iran war impacted fuel. To cope with the shock of war and rising fuel prices in the global market, fuel prices were adjusted in two phases in April and mid-May, resulting in an 18 percent increase in fuel oil prices. Electricity prices were increased in the last week of May. Experts believe that inflationary pressure has consequently increased. The overall global and local fuel situation has impacted the country’s inflation, according to them. The increase in fuel and electricity prices in April and May led to higher transportation costs, which in turn caused the prices of food and non-food items to rise. When market prices of goods increase, it affects the lower and middle-income classes.
M Masrur Reaz, chairman of the private research organisation Policy Exchange Bangladesh, said, “Inflation is still at a high level. It has been trending upward since December, rising for three years. Despite it decreasing slightly now, it remains at a high level. As a result, people’s purchasing power has declined, living costs have increased, and business costs have risen. If this continues, the devaluation of the Taka will begin at some point. The government kept the policy interest rate high, which was necessary, but that alone won‘t be enough. The reason for the rise in inflation over the last few months is the supply deficit compared to market demand. To reduce inflation in the coming days, the interest rate needs to be maintained for another period, monetary policy must be tightened, and market supply must be increased.”
Inflation began to rise in the country after 2022 due to the upward trend in commodity prices and weak market management, according to the BBS data. At that time, when the dollar crisis began, the Taka was devalued. The price of the dollar rose from BDT 84 to over BDT 120 in just two and a half years, and it is currently over BDT 123. After that year, it was no longer possible to bring the country’s inflation under control. Within five years, the average inflation in the 2021-22 fiscal year was 6.15 percent. In the 2022-23 fiscal year, it jumped to 9.09 percent. Inflation was 9.73 percent in the 2023-24 fiscal year and reached a peak of 10.03 percent in 2024-25. While Bangladesh has not been successful in controlling inflation during this period, most countries in the world have been. Last year, South Asian countries like India, Sri Lanka and Nepal showed significant success in controlling inflation.
But considering the global situation due to the Iran war, the inflation forecast for Bangladesh provided by the International Monetary Fund (IMF) was avoided to some extent this time. Despite the IMF stating last April that the inflation forecast could increase from 8.7 percent to 9.2 percent, Bangladesh managed to keep it slightly lower. Earlier, the World Bank and the Asian Development Bank (ADB) had forecasted the average inflation to be 8.5 percent, but at the end of the year, inflation stood at 8.68 percent.
Dr Mustafa K Mujeri, executive director of the Institute for Inclusive Finance and Development (InM), believes that the government’s measures to control inflation have failed. He told Bonik Barta, “Despite Bangladesh Bank having increased the policy interest rate over the past few years to control inflation, the results aren’t satisfactory at all. This policy has failed in Bangladesh for three to four years. In the prevailing situation, the government must step forward to control inflation and increase investment in the private sector. In this regard, reforms in fiscal policy, market and supply systems are required. Otherwise, a monetary policy aimed at controlling demand will be of no use. And to increase private sector investment, fuel security and the law and order situation must be improved first.”
Even though the prices of food commodities have decreased in the global market, the prices of almost all products in the Bangladeshi market are still on the rise. Market insiders say that with the increase in fuel prices, the prices of almost all goods have risen. The increase in transport costs has had an impact on commodities. Traders are adjusting transport expenses with product prices. Furthermore, the government's two-phase hike in electricity and oil prices has also had an impact on the market.
Food inflation decreased to 8.60 percent in June, according to BBS data. Although market food prices remain on an upward trend, the BBS reported a decline in inflation. Food inflation was 9.06 percent in May. Non-food inflation also decreased; it stood at 9.61 percent in June, compared to 9.71 percent in May.
Inflation also declined in both rural and urban areas. In June, inflation was 9.23 percent in rural areas and 9.01 percent in urban areas, with a decrease in both food and non-food sectors in both settings. Despite inflation having been rising in the country for several months, wage growth has not kept pace. The wage rate for labour in June was lower than in May, at 8.18 per cent compared to 8.21 per cent.
While there are allegations that the BBS has consistently provided exaggerated inflation data, the agency claims it can now provide information free from pressure, unlike in the past. Md Sahabuddin Sarkar, director (acting) of the agency’s National Accounting Wing, stated, “Inflation calculations are prepared using data from 154 markets across 64 districts. There’s no pressure here like before. We’re able to provide 100 percent accurate data. The government is taking various initiatives to make this information more accurate and reliable, and we hope to see the results in the future.”
State Minister for Planning Zonayed Abdur Rahim Saki stated that the government is forming a technical committee to make inflation data realistic and credible. Speaking recently at a BBS event, he said, “A lack of trust has developed among people regarding statistics. To restore that trust, accurate and credible information must be presented. There are plans to adopt internationally recognised and modern methods for measuring inflation so that the CPI (Consumer Price Index) can better reflect the actual expenditure patterns of general consumers.”