New pay scale could worsen inflation pressures: BB

The Bangladesh Bank on Wednesday warning the partial implementation of the 9th Pay Scale for government employees could add to inflation pressures in the days ahead.

The consumer inflation trajectory is already under pressure from energy price hikes spurred by the Middle East wars, and the partial rise in public employee salaries is an added risk to the crisis, the central bank said in its Quarterly Monetary Policy Statement (QMPS) for the year’s last three months.

The looming pressures convinced monetary policymakers to retain interest rate at 9.5%, despite headline inflation hitting 10-month low of 8.26% in August, the statement read.

"The recent increase in administered fuel prices is likely to raise transport and production costs, while partial implementation of the national pay scale could add further inflationary and fiscal pressures," the central bank noted in the policy statement.

While food inflation fell to 7.02% in August, non-food inflation remained elevated at 9.32%, highlighting that entrenched price pressures would likely intensify amid transportation fare hikes and trickle-down effect of partial government salary hikes.