High inflation has gripped the country continuously for the past four years. Despite successive hikes in the policy interest rate, it has not been possible to bring it down to the desired level. The downward trend in inflation observed over the past few months has also faded due to the upward momentum in the fuel and vegetable markets. Average inflation in the country rose to 9.21 percent in the final quarter (April–June) of the 2025–26 fiscal year compared to the previous quarter, according to Bangladesh Bank data. Primarily, the price hikes of fuel oil and gas, alongside increasing vegetable prices, further increased inflation during this period. Meanwhile, as wage growth lagged behind the inflation rate, pressure on people’s real income and purchasing power increased further.
Average overall inflation rose to 9.21 percent in the final quarter of FY 2025–26, which was 8.8 percent in the previous quarter, according to data from the quarterly report titled “Inflation Dynamics in Bangladesh: April–June 2026” published by the research department of Bangladesh Bank. During the same period, food inflation rose to 8.7 percent, non-food inflation to nearly 9.6 percent, and core inflation increased from 8 to 8.4 percent.
Fuel inflation surged from 14.9 to 17 percent in the reviewed quarter, according to the report. The most significant changes occurred in the prices of gas and fuel oil. Inflation for fuel oil and lubricants jumped from 1.7 to 13.8 percent, while gas inflation rose from 11.3 to 24 percent. Price adjustments in these two sectors are the primary drivers of the increase in fuel inflation, according to Bangladesh Bank. But solid fuels such as firewood, cow dung, agricultural residues and jute sticks still maintain a significant contribution to overall energy inflation.
A food inflation analysis shows that vegetable prices exerted the greatest pressure during the reviewed quarter. The contribution of vegetables to food inflation surged from 22.7 percent in the previous quarter to 37 percent. But protein-based food products still account for the highest contribution to overall food inflation. Items in this category — such as fish, meat, eggs, milk and lentils — contribute approximately 46 percent. Price pressures for rice, edible oil, spices, and cooking ingredients eased slightly.
Price volatility in the market for food items, including vegetables, persists. The price of most vegetables has now exceeded BDT 100, while green chillies have reached BDT 400 per kilogram. Prices for local onions and farm chicken eggs have also increased. Renewed price hikes have been observed for most fish varieties, including Pangasius, Tilapia, Rohu, Pabda, shrimp and native Koi. Meat continues to be sold at high prices.
Regarding inflation, price pressures persist not only in food products but also across various service sectors. The primary drivers of core inflation in the country during the final quarter of FY 2025–26 were transport and communication services, particularly internet expenses. Healthcare, personal care and education-related expenses also rose during this period.
Dr Mustafa K Mujeri, former chief economist of Bangladesh Bank and executive director of the Institute for Inclusive Finance and Development (InM), told Bonik Barta, “Both seasonal and structural factors have worked behind the inflation rise. The energy security crisis hasn’t yet been fully resolved. As gas supplies have failed to normalise, production costs in the industrial, agricultural and service sectors have increased. Agricultural production was also disrupted in various regions due to floods, creating supply pressures for various food items such as vegetables and rice.”
He added: “Demand-driven pressures behind inflation also remain. Liquidity in the rural economy has increased due to rising remittance inflows. But a major portion of current inflation is being driven by non-monetary factors such as supply chain bottlenecks, energy crises, natural disasters and weaknesses in market management. So raising the policy interest rate can’t solely control inflation. It’s necessary to ensure energy supplies, strengthen market monitoring, eliminate weaknesses in the supply chain, and take coordinated steps in trade and agricultural policies. Only then can inflation be sustainably brought under control.”
An analysis of the central bank’s diffusion index of inflation shows that out of 382 consumer price index items in June, the prices of 261 items increased compared to the previous month. The prices of only 22 items decreased, while 99 items remained unchanged. In other words, price hikes are no longer limited to a few commodities; rather, they have spread over a wide range. Inflation has also outpaced the wage growth rate for two consecutive years. But this gap narrowed slightly in June due to a minor slowdown in inflation rather than any significant progress in wage growth. This has sustained pressure on people’s real incomes and purchasing power.
The inflation graph in the country has been on an upward trend since the 2022–23 fiscal year. The average inflation rate for that fiscal year was 9.02 percent. In the subsequent FY 2023–24, inflation stood at 9.73 percent, and it further increased to 10.03 percent in 2024–25. Despite declining inflation slightly in the latest 2025–26 fiscal year, it still remains above 8 percent (at 8.68 percent).
Overall consumption expenditure decreased as consumers’ purchasing power has contracted due to high inflation. This has consequently led to stagnation in business and commerce. Raising the policy interest rate, meanwhile, to control high inflation has also driven up bank lending rates. Since 2022, Bangladesh Bank has continuously raised the policy interest rate from 5 to 10 percent to control inflation. Bank lending rates have consequently exceeded 15 percent in many cases. But despite such a contractionary monetary policy, inflation has not decreased to the expected level. Last June, the inflation rate stood at 9.16 percent. During the same period, credit growth in the private sector fell below 5 percent, indicating stagnation in investment and business expansion. Last Thursday, the central bank reduced the policy interest rate by 50 basis points to set it at 9.5 percent.
Professor Mustafizur Rahman, distinguished fellow at the Centre for Policy Dialogue (CPD), told Bonik Barta, “The high inflationary pressure is still a reflection of the macroeconomic vulnerabilities in the country. Inflation isn’t coming down to the desired level due to the slow pace of private investment and credit growth, energy price and supply crises, and disruptions in agricultural product supplies caused by natural disasters.”
He said: “It’s not possible to resolve this situation solely through a contractionary monetary policy. Supply-side reforms, improvement in market management, ensuring the timely supply of import-dependent goods, and reducing the cost of the supply chain from production to the consumer must be implemented. There needs to be effective implementation of an investment-friendly fiscal policy, single-window services, development of logistics systems, reduction of goods clearance times at ports, and enhancement of the effectiveness of bonded warehouse facilities.” He also emphasised strengthening social safety net programs such as OMS and Family Card initiatives. Alongside monetary policy, there is no alternative to injecting momentum into investment, ensuring energy availability, and enhancing institutional capacity to control inflation, he also added.