Food inflation has reached its highest in three years on a point-to-point basis in December 2010 due to rising food prices on both local and international markets.
According to Bangladesh Bureau of Statistics (BBS), food inflation increased by 1.2 percentage points to 11.01 percent in December, compared to the previous month, but non-food inflation decreased by 0.06 points to 3.27 percent.
The country's poor rural population felt the heat most, as food inflation there reached 11.76 percent in December, which was 10.53 percent in November.
Inflation increased to 8.28 percent on a point-to-point basis in December 2010, which was 7.54 percent in November.
Bangladesh Bank (BB) said rising trends of global food prices, energy and industrial commodities will be the short-term external source impacting domestic inflation in the coming months.
Food crop growers get price subsidies for fertilisers and irrigation fuel, but they are facing higher costs because of a rise in wages of agricultural labourers in recent years, BB said in its latest monetary policy statement.
Severe food inflation in India and high international prices of food commodities mean there would be no calming influence on food prices from imports by private sectors -- another reason why local rice prices are high and rising even after a good aman harvest.
The central bank said monetary policy actions will have little leverage on rising food prices in this situation. Fiscal measures like subsidised food grain sales from public-stock may need to be expanded to ease hardships of low income population, it said.
Domestic consumer prices have already contributed to wage increases in the apparels sector, declared four months in advance and will be effective from June.
An energy price revision to adjust high import prices of fuel oil and costly power from rental power plants is reportedly under process.
This will be effective in the remaining period of the current fiscal year and is expected to impart some upward spurt to non-food inflation.
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