• Monday, Aug 15, 2022
  • Last Update : 04:24 pm

Inflation exceeds government's target for FY2020-21

  • Published at 07:44 pm July 19th, 2021

As per BBS data, the 5.64% inflation recorded in June this year is the highest in the last eight months

The average inflation exceeded 0.16 percentage points above the government’s target of 5.4%.

According to the Bangladesh Bureau of Statistics (BBS) data, the average inflation currently stands at 5.56%, Mohiuddin Ahmed, deputy director of BBS under the Ministry of Planning, told Dhaka Tribune. 

As per BBS data, the 5.64% inflation recorded in June this year is the highest in the last eight months. 

Earlier in 2019-20 FY, the average inflation was 5.65%.

Also read - Budget FY22: Inflation target set at 5.3%

According to the financial website Investopedia, too much inflation is generally considered as bad for an economy, while too little inflation is also considered harmful. 

Many economists advocate for a middle-ground of low to moderate inflation, of around 2% per year. 

The negative effects of higher inflation include an increase in holding money and uncertainty over future inflation, which may discourage investment and savings.

If inflation is rapid enough, it can also cause shortages of goods as consumers begin hoarding, being concerned that prices will increase further in the future.  

Also, higher inflation is also considered harmful to the stock market because it increases borrowing costs, and input costs such as materials, labour, and reduces standards of living. It reduces expectations of earnings growth, putting downward pressure on stock prices.

Asian shares already slipped again on Monday as investor risk appetite was soured by fears of rising inflation and a relentless surge in coronavirus cases, reports Reuters. 

Global economic growth is also beginning to show signs of fatigue while many countries, particularly in Asia, are struggling to curb the highly contagious Delta variant of the coronavirus and have been forced into some form of lockdown. 

The spectre of elevated inflation, which the market has long feared, is also haunting investors.

Also read - Global stocks on worst run in 18 months amid Covid-19 surge

Economists at Bank of America have downgraded their forecasts for US economic growth to 6.5% this year, from 7% previously, but maintained their 5.5% forecast for next year.

"As for inflation, the bad news is it’s likely to remain elevated near term," they said in a note, pointing to their latest read from their proprietary inflation meter which remains high.

"The good news is, we are likely near the peak, at least for the next few months, as base effects are less favourable and shortage pressures rotate away from goods towards services."

US Federal Reserve Chair Jerome Powell has repeatedly said any inflation flare-up is expected to be transitory, indicating monetary policy will remain supportive for some while yet.