Average inflation in Bangladesh

Average inflation measures the average change over the year in the prices of the basket of goods and services consumed by Bangladeshi households, based on the Consumer Price Index. It is compiled by the Bangladesh Bureau of Statistics (BBS) and tracked by Bangladesh Bank.

It is obtained from a regular price survey across a sample of urban and rural outlets, weighting each product by its spending share. Average inflation is the mean of the year's monthly rates of change relative to the prior year, expressed as a percentage.

Inflation is the key variable for Bangladesh Bank when setting interest rates and for the stability of the taka. A high reading, very sensitive to food prices that carry a large weight in the basket, erodes purchasing power and pushes towards tighter monetary policy.

As an annual average it smooths the year's peaks and reacts with a lag to recent price moves. The heavy weight of food adds seasonal volatility; it only measures the defined basket rather than every good in the economy.