Inflation has fallen below 9% for the first time in more than two years, but with wage growth still dwarfed by rising costs of living and month-on-month price increases persisting, economists are warning against premature celebration.
According to the Bangladesh Bureau of Statistics (BBS), inflation fell to 8.48% in June from 9.05% the previous month, marking the lowest level since March 2023.
During the relentless 27-month run, inflation had shot up to as high as 11.66%, recorded in July last year.
The fall is primarily attributed to a sharp drop in food inflation, which declined to 7.39% in June from 8.59% in May.
Non-food inflation, however, showed a more modest decline – dropping to 9.37% from 9.42%.
Seasonal relief or structural improvement?
While the latest figures have been met with cautious optimism, economists remain sceptical about whether the improvement signals a long-term trend.
"This drop is certainly welcome, especially after months of double-digit inflation. However, we must be careful not to interpret this as a signal that the crisis is over," said Selim Raihan, a professor at Dhaka University's economics department.
"We are witnessing the impact of improved weather conditions, stable exchange rates, and a contractionary monetary policy finally filtering through. But structural vulnerabilities are still very much intact."
Echoing those concerns, Zahid Hussain, a former lead economist at the World Bank's Dhaka office, called the development "good news" but noted worrying month-on-month figures.
"While year-on-year inflation has dropped, the month-on-month picture remains troubling. In June, prices were 0.57% higher than in May. Food prices rose by 0.95% while non-food items went up by 0.27%," he said.
Data shows that most commodity groups saw price increases: clothing and footwear rose by 0.12%, housing and utilities by 0.29%, and household items by 0.15%. The only notable decline was seen in the transport category.
Inflation target missed by a mile
Despite easing in June, the government failed to meet its inflation target for the fiscal year. The average inflation rate from July 2024 to June 2025 stood at 10.03 per cent, significantly above the official target of 6.5 per cent.
Such persistent inflation has taken a heavy toll on low- and middle-income families, for whom food and essentials make up the bulk of monthly spending.
"This is not just a number; it reflects real hardship," said Dr Mustafa K Mujeri, an executive director of the Institute for Inclusive Finance and Development and a former chief economist at the Bangladesh Bank.
"Although inflation has cooled, household purchasing power remains under severe strain. The average family has seen its real income steadily eroded."
Wage growth trailing inflation for nearly 4 years
The national wage rate index rose to 8.18% in June, slightly down from 8.21% in May, marking the 41st consecutive month that wages have remained below inflation.
This means that, in real terms, incomes continue to shrink.
Real-world market prices reinforce such concerns.
According to data from the Trading Corporation of Bangladesh (TCB), key staple prices continue to rise:
- Medium rice prices rose to Tk 70/kg, up from Tk 65 last week.
- Loose flour prices increased by Tk 5/kg, now selling at Tk 55.
- Potato prices went up by Tk 3–5/kg.
- Local garlic prices surged by Tk 10/kg, now priced between Tk 110–150.
- Farm eggs saw an increase of Tk 1–3 per dozen.
Only broiler chicken showed a decline, falling by Tk 5/kg to Tk 170. Meanwhile, prices of spices like cinnamon and cloves and essentials like rice bran oil (5L bottles) have also gone up.
"These weekly price hikes may not always register in national inflation averages, but for ordinary citizens, they mean choosing between food and medicine," Dr Mujeri warned.
"Wage growth simply isn't keeping up. For most people, this means lower consumption, growing debt, and increased vulnerability."
Policy measures starting to take hold
Economists agree that some of the recent improvements are the result of decisive policy interventions by the central bank and commerce ministry.
"The central bank's tight monetary stance-especially after lifting the interest rate cap last October-is finally beginning to bite," said Hussain.
"Transmission of policy was previously weak, but in the last three months, we've seen better alignment between policy and market outcomes."
The government has also strengthened market oversight, improved supply chains, and allowed greater exchange rate flexibility.
Crucially, essential food items like onions and green chillies – known for seasonal price volatility – have seen prices remain stable in recent months, a shift attributed to tighter monitoring and rapid response mechanisms.
Still, Professor Raihan urged caution.
"One good month does not make a trend. Inflation is falling, yes—but we need to be vigilant," he said.
"Global commodity markets remain uncertain, and Bangladesh's domestic logistics are still fragile. A single supply shock could reverse this progress."
GDP Shows Modest Recovery
Alongside inflation data, the BBS reported that gross domestic product growth in the third quarter of fiscal year 2024-25 rose to 4.86%, up from 4.62% in the same period last year.
The first two quarters recorded growth of 1.96% and 4.48% respectively, indicating a gradual but slow recovery.
However, growth remains well below pre-pandemic levels and insufficient to absorb the country's expanding labour force or raise per capita income significantly.
No Room for Complacency
Despite the encouraging fall in headline inflation, the road ahead remains uncertain. Both Raihan and Hussain called for consistency in monetary policy, targeted fiscal support, and long-term structural reforms.
"Inflation is still far above the central bank's 5–6 per cent target," Hussain cautioned.
"The upcoming monetary policy must prioritise price stability above all else. There's no room for political pressure or short-term thinking."
Professor Raihan added, "Sustained improvement will require more than interest rate tweaks. Bangladesh needs to invest in domestic production, resilient supply chains, and above all, ensure that wage growth matches inflation. Without this, economic recovery will remain fragile."
Although June's inflation decline offers a rare moment of relief, Bangladesh's broader economic picture remains clouded by structural weaknesses.
While macro-level indicators may show improvement, household budgets are still tightening. As market prices continue to climb for staples like rice, garlic, and flour, the battle against inflation will not be won in boardrooms alone, it will be decided in the kitchen markets and pay packets of ordinary Bangladeshis.
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