The Bangladesh Bank (BB) expects the soaring inflation will be stable in the coming months and come down to single-digit in the last quarter (Q4) of current financial year.

The central bank in a working paper, submitted to the parliamentary standing committee on the finance on Monday, said the inflation would start declining in the last quarter of 2011-12 fiscal year unless any domestic or external causes outclass the prospect.

"The stable and downtrend in global commodity prices will have similar impact on domestic market," BB said, hoping the trend would simmer off the rising inflation.

The central bank said the inflation had been on the rise since 2009 and hovering over 10 percent in recent months, making days uncomfortable for "fixed income group" people.

The money market regulator, however, said it would continue its efforts to bring down the inflation in line with the government's steps to control the spiralling prices of commodities.

The BB said it would continue using various tools, including repo and reverse repo rates, bank rates and buying or selling dollars, to maintain comfortable money supply to the market, which would eventually stabilise the inflation.
The banking regulator is following a monetary policy to help increase money supply to the productive sector to create more avenues for maintaining the steady supply of goods and services, which will stabilise the domestic demands and thus the inflation.

Referring to the reducing subsidy to fuel oil, power and fertilisers to ease financial burden on the government, the BB said non-food inflation would not come down "until the government completes the necessary process to lower the burden of subsidy".

The non-food inflation was 11.38 percent in December.
"The depreciation of taka against dollar also created pressure on consumer price inflation by making import costlier," the central bank said, but it observed that the depreciation also paved the way for bringing balance in exchange rate by encouraging more remittances and accelerating export growth.

The central bank said it had already withdrawn the ceiling on bank rates, which would reduce fund flow to the market by making credit costlier for many sectors.

"The high interest and limited access to liquidity will soon stabilise the exchange rate and the reserves," the BB said.

The Daily Star/Bangladesh/ 11th Jan 2012