The International Monetary Fund (IMF) has recommended that Bangladesh Bank (BB) take proactive steps to curb the “second-round effects” of inflation, which have been escalating due to recent supply-driven price increases.

At a press conference held in Tokyo on November 1, Thomas Helbling, IMF Deputy Director for the Asia Pacific Department, emphasized the central bank’s role in controlling inflationary expectations.

Helbling explained that while much of Bangladesh’s current inflation is supply-related, persistent price increases can drive inflation expectations, leading to “second-round effects.”

These effects occur when workers, anticipating further price rises, demand higher wages, prompting businesses to raise prices to offset increased labor costs. This wage-price spiral can embed inflation more deeply into the economy, making it difficult to control.

Bangladesh has been grappling with high inflation, which has remained above nine percent since March 2023 and reached 10.87 percent in October, largely due to soaring food prices. Helbling noted that the central bank’s recent increase in the repo rate was a positive step, signaling monetary policy tightening to help contain inflation.

In its recent Asia-Pacific economic outlook, the IMF revised inflation projections upward for Bangladesh, attributing this to disruptions from labor unrest and severe flooding, which have impacted supply chains and economic stability.