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A theory is appropriate as long as it fits into the fact; when a theory doesn't fit in the fact, it's wise to walk with the fact.

Thursday, August 18, 2011

Food inflation in July is 13.4%!!!

So, inflation keeps rising, reached to 11.0% in July 2011 (Inflation was 10.2% in June).
In rural areas, inflation was 11.1% and in urban areas, it was 10.7%.
Food inflation reached to 13.4%, while the same in rural areas was even higher at 13.5%.

Here is the news link from the Daily Amar Desh.

On the impact of higher inflation on the Bangladesh economy, I just quote a part (para 2, page 6) of the recent Monetary Policy Statement (MPS, July 2011) of the Bangladesh Bank -

"Empirical studies with cross country data find moderate inflation supportive up to a certain inflexion point, beyond which further rise in inflation starts hurting growth. A recent estimation by BB's PAU following methodology developed by Khan M S et al finds that this inflexion threshold for Bangladesh at around eight percent; although the adverse effect on growth may not always show up immediately."

According to the Bangladesh Bank's official findings, with 11.0% inflation rate, the current inflationary period is actually hurting the country's economic growth.

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