The International Monetary Fund’s recommendation of higher interest rates to tame inflation is failing to produce results. Price pressures within Bangladesh are mounting once again; official data reveal inflation climbed further to nearly 8.5 percent in December. The Bangladesh Bureau of Statistics reports the rise follows an uptick in the previous month, signalling a stubborn upward trend. The spike defies broader macroeconomic gains, including eased dollar shortages, a balance-of-payments surplus, and a stabilised currency market.
Global consumer prices, including for fuel, eased throughout 2025. International markets saw significant drops in the prices of oil, rice, wheat, soybean oil, powdered milk, and spices, while shipping freight costs also dropped. Yet these global price drops did not reach Bangladeshi consumers. Instead, they endured the burden of high inflation throughout the past year, much as they had for the prior two years.
The BBS data show point-to-point inflation reached 8.49 percent in December, up from 8.29 percent in November. Food inflation for the month stood at 7.71 percent, while non-food inflation soared to 9.13 percent. Official data indicate food inflation has now climbed for three months in a row. For the full calendar year of 2025, the average inflation rate reached 8.77 percent.
While Bangladesh struggled, most of the world succeeded in taming inflation last year. IMF estimates the global average inflation rate was 4.5 percent in 2025, down from 6.8 percent in 2023. Data provider Statista places the figure even lower at 3.3 percent, a steep drop from 5.76 percent in 2024. U.S.-based JP Morgan’s research highlights an approximate two-percentage-point drop in global inflation.
South Asia saw notable successes where India, Pakistan, and Sri Lanka all made significant strides in controlling inflation. India’s inflation plummeted to a mere 0.71 percent in November, with expectations it remained low in December. Sri Lanka recorded deflation for over half the year. The country’s inflation edged up to a manageable 2.1 percent in December, according to the Central Bank of Sri Lanka. Even crisis-ridden Pakistan brought its rate down to 5.6 percent by December.
Economists and market analysts argue the measures taken by the government and the Bangladesh Bank have proven ineffective. They say the tight monetary policy and high-interest-rate strategy, meant to control inflation, have harmed the supply system instead. A credit crunch has further weakened the private sector, stifling job creation and eroding the overall purchasing power.
Economist Dr. Mustafa K Mujeri contends that the policies and measures adopted by the government and central bank to control inflation have simply not worked. “The steps taken by the central bank over several years — raising interest rates and enacting a tight monetary policy — have failed to curb inflation,” he told Bonik Barta. “On the contrary, we are seeing the rate climb again for two consecutive months. This means the high inflation in our country is not demand-driven; it is stemming from flaws in the supply system, deficits in market management, and associated conditions. The interim government has also been unable to rein in the powerful market mafia.”
Dr. Mujeri, a former lead economist of the Bangladesh Bank and now executive director of the private research organisation Institute for Inclusive Finance and Development (InM), pointed to the contrasting success of neighbouring nations. “Inflation in India is now below one percent, while Sri Lanka has seen it turn negative. Pakistan has also brought its rate under six percent. We must analyse why we are failing,” he said. “Global prices for nearly all consumer goods, including fuel, fell over the past year. Yet the gap between import costs and retail prices here is vast. The government cannot control the intermediaries, making inflation containment exceedingly difficult.”
Global commodity trends back this assessment. According to the World Bank’s Pink Sheet and the Chicago Board of Trade, palm oil fell from $1,070 per tonne in January 2025 to $1,008 by December. Soyabean oil — a key import and a staple of the Bangladeshi kitchen — dropped from $1,061 to $1,040 per tonne in the same timeframe. This downward trajectory extended to grains, with global rice prices falling from $478 to $415 per tonne and wheat dropping by about $25 per tonne. Other essentials also recorded price drops, with sugar falling from 40 to 30 cents per kilogram and powdered milk by $100–200. Bangladeshi consumers, however, saw no benefit from these reduced international prices; domestic prices for these largely import-dependent goods failed to fall and in some cases rose.
Energy prices followed a similar downward trajectory globally. The price of crude oil (WTI) plummeted from $78.2 per barrel in January to $58 by December last year. Yet reductions at the domestic pump were minimal.
BBS data show inflation’s sharp rise started after 2022, triggered by a dollar crisis and a steep currency devaluation. The taka tumbled from BDT 84 to over BDT 120 per dollar within two and a half years — a devaluation of nearly 45 percent. This shock sent inflation soaring. In response, the central bank pivoted to a contractionary monetary policy from 2023, later hiking the policy rate to 10 percent after the student-led mass uprising of August 5, 2024. However, market inflation remains stubbornly unchecked despite this stringent monetary stance.
The uprising disrupted supply chains, sending overall inflation to a record 11.66 percent in July 2024. It then began a slow retreat, falling to 8.17 percent by October of last year — the lowest in 39 months. The trend then reversed. From October’s 8.17 percent, inflation rose to 8.29 percent in November and climbed further to 8.49 percent in December. Many contend, however, that the real price in the markets is far higher than these official calculations suggest.
Market analysts note vegetable prices remained stubbornly high throughout 2025. Even after the onset of the winter growing season, costs in November and December saw little relief. A sharp late-December drop in farmer-level prices failed to reach retail consumers. Meanwhile, prices rose over the year for most essentials: rice, lentils, sugar, flour, fish, meat, and LPG. This persistent pressure, analysts say, made it impossible to bring annual inflation down to expected levels.
When questioned, BBS Director General Mohammed Mizanur Rahman told Bonik Barta, “We calculate inflation by collecting data from various markets across all 64 districts. This shows food inflation edged up last month. Vegetable prices were somewhat higher. Yet food inflation remains lower than it was during the same period the previous year. Prices for some non-food items also rose slightly in December. These factors contributed to the higher rate over the past two months, but the overall trend compared to last year is still downward.”
Economists and market observers have long questioned the accuracy of the BBS inflation data. Even taking the official figures at face value, Bangladesh ended the year with the highest inflation rate in South Asia. Sri Lanka’s rate stood at just 2.1 percent last month — a remarkable turnaround for a country that declared bankruptcy two-and-a-half years ago and grappled with inflation rate as high as 70 percent. Pakistan has achieved similar control, bringing its rate down to 5.6 percent last month from a peak of 38 percent in April 2023. Other regional rates are also significantly lower than Bangladesh’s, with India’s inflation falling below one percent (0.71%) in December 2025.
“The fact that inflation is rising again for two consecutive months raises fresh questions about the efficacy of recent economic policy,” said Selim Raihan, executive director of the South Asian Network on Economic Modeling (SANEM). “Despite minor fluctuations, there is no visible change in the overall trend. The government has tried to suppress demand by raising interest rates, but it cannot manage the situation because a durable stability has not been created amid multifaceted pressures, including policy coordination, market structure, and external risks.”
Highlighting the impact of weaknesses in the agricultural supply chain, the economist added, “Price increases for essential foods like onions and vegetables over the last two months have intensified overall inflation. This demonstrates the profound weakness of our agricultural supply system and the extent to which a lack of market competition is having an effect. In this context, controlling inflation requires not just monetary policy, but robust institutional reform.”