Inflation in Bangladesh has increasedfrom 1.9 percent in FY01 to 7.2 percent in FY06. The biggestincrease was in food prices.Food price inflation increasedfrom 1.4 percent in FY01 to 7.8 percent in FY06.Bycontrast, non-food price inflation only doubled during thesame period. Food price inflation has been well abovenon-food inflation since FY04. The rise in food inflationcould have resulted from developments in global commoditymarkets, particularly since FY05, increases in domesticproduction costs, and domestic demand. Inflation increasedin most major world economies during FY06 following a surgein international commodity, energy and related fuel prices.The relationship between inflation and growth remainscontroversial both in theory and in empirics. Theinflation-growth relationship for Bangladesh, India,Pakistan and Sri Lanka none of these countries have had highinflation episodes in recent decades. Their analysis showsthat growth rates and inflation rates for all four countriesare co integrated, implying that there is a long runrelationship between inflation and growth in all four countries.
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