July 11, 2017 / 11:59 AM / in 17 days

UPDATE 1-Bangladesh inflation cools in FY 2016/17, food inflation climbs

2 Min Read

* Food inflation hit 2-year high; big worry for government

* Rice seen as major contributor to price rise

* Government steps up rice imports to rein in record prices (Adds quotes, details)

DHAKA, July 11 (Reuters) - Bangladesh's annual inflation eased to 5.44 percent in the financial year that ended in June, the planning minister said on Tuesday, as non-food prices rose at a slower pace but food prices climbed to a two-year high.

Food inflation in the financial year hit 6.01 percent, up from 4.9 percent in the previous year, Mustafa Kamal told a news conference. In contrast, non-food inflation eased to 4.61 percent from 7.43 percent.

Rising food prices pushed up annual inflation in the April-June quarter to 5.72 percent from 5.28 percent in January-March quarter.

Food inflation has accelerated mainly due to a surge in the price of rice, the staple food for the population of 160 million. Higher prices of meat, edible oil, milk and other items also contributed.

"Steps are being taken to contain rice prices," Kamal said.

The government has started to import rice for the first time since 2011 to combat record prices after flash floods in April hit domestic output amid dwindling state reserves.

It has also cut the import duty on rice imports and the central bank has ordered banks to allow traders to import rice without any deposit against letters of credit.

But domestic prices hardly budged, which is a major concern for the government as a general election is due next year.

In January, the central bank kept its key policy interest rates unchanged, citing overall macroeconomic stability and a steady inflation outlook.

In January 2016, the central bank cut its key interest rate by half a percentage point for the first time in nearly three years as easing inflation gave it room to help spur economic growth.

Reporting by Ruma Paul; Editing by Clarence Fernandez, Robert Birsel

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