Inflation in Bangladesh saw a marginal decline in the second quarter of the current fiscal year, averaging 11.1 percent, with food prices contributing more than half to the overall increase in prices.

According to a Bangladesh Bank report on inflation dynamics, food prices accounted for 53 percent of the rise in prices during the October-December quarter, an increase from 50 percent logged in the previous quarter.

Core inflation, which excludes volatile food and energy items, accounted for approximately 45 percent while energy contributed one percent.

"Food inflation peaked in November 2024, recording the second-highest level in 13 years, before moderating slightly in December, though it continued to exceed double digits," read the report, released yesterday.

The primary contributors to food inflation in the second quarter of FY25 were protein-based items, with the central bank reporting that they accounted for 38.35 percent of food inflation, followed by vegetables at 30.23 percent and cereals at 22.87 percent.

The contribution of cereals, which spiked significantly in the first quarter of the current financial year, continued and became more pronounced in the October-December quarter.

However, the contribution of spices and culinary essentials marked a significant drop in the second quarter, declining from 26.16 percent in the July-September quarter to 6.13 percent.

"Other categories, such as edible oil and related products, had a lesser impact on food inflation this quarter," the central bank said.

Non-food inflation decreased to 9.26 percent in the second quarter of FY25 from 9.50 percent in the previous quarter.

Energy, which had been a major factor in non-food inflation since mid-2022, has seen its share decline since the beginning of FY25. It contributed approximately 3.26 percent in December 2024. A year ago, energy prices accounted for 27.30 percent of overall inflation.

However, housing rental costs, particularly in rural areas, began to contribute more significantly from August 2024 onwards.

The report said the contribution of import-dependent items to inflation declined to 16 percent in December from 26 percent in September, as domestic items played a more dominant role in driving price levels.

"While non-food inflation showed a slight reduction, it remained elevated, continuing to exert pressure on households. The impact of imported goods on inflation declined, offering some relief, but domestic food and service prices remained high," the central bank said.

The central bank also cited that inflationary pressures continue to outpace wage growth, leading to reduced purchasing power.

In December 2024, inflation stood at 10.9 percent, while wage growth lagged behind at 8.1 percent.

"Despite these improvements, wage growth remained insufficient to keep pace with inflation, thereby limiting real income gains and sustaining pressure on household purchasing power."