What is inflation?
Inflation is the rise over time in the general level of prices of goods and services. Not one or two items getting dearer, but prices on average: rice, lentils, oil, rent, transport, healthcare, all together. Inflation of 8% a year means the things that cost Tk 100 last year now cost about Tk 108 on average.
Seen the other way round, inflation is the loss of money’s buying power. The number printed on the note stays the same, but it buys less. So savings can quietly “shrink” even when the amount on paper does not fall.
Say that in 2020 Salma spent Tk 10,000 a month on groceries. If prices rise by 8% a year on average, the same groceries cost about Tk 14,700 five years later. If she still has only Tk 10,000, she has lost nothing on paper, but she can buy roughly a third less than before. The numbers are only an example.
Why it matters to an investor
- To measure your real gain: what is left after taking inflation away from the interest or profit rate is the real growth of your money. This is called the real return.
- To see the “silent loss” on cash kept at home: with 8% inflation, cash at home loses roughly 8% of its buying power each year.
- To understand why interest rates change: when inflation is high, the central bank usually raises its policy rate. Deposit rates then rise, and the prices of bonds bought earlier can fall.
- To plan goals properly: costing something ten years away (education, a home, retirement) at today’s prices badly underestimates it.
How it is measured
In Bangladesh, inflation is measured by the Bangladesh Bureau of Statistics (BBS) using the consumer price index (CPI). A “basket” of the goods and services ordinary households buy is defined, and their prices are collected every month. How much the basket’s total cost has risen is the inflation rate.
The news usually reports two kinds of figures. “Point-to-point” means how much higher this month’s prices are than in the same month last year. The “12-month average” is the average inflation over the past twelve months. Food and non-food inflation are also published separately.
- Your own inflation can be lower or higher than the official rate, because your spending basket is not the average household’s. Someone whose biggest costs are rent or their children’s schooling will experience it differently.
In Bangladesh in recent years
According to the World Bank, annual inflation in Bangladesh was roughly between 5.5% and 7.5% from 2012 to 2021. It then rose to about 7.7% in 2022, about 9.9% in 2023 and about 10.5% in 2024, before easing to about 8.8% in 2025.
Month by month, point-to-point inflation reached 11.66% in July 2024, then the highest in about 13 years. In September 2026, BBS put it at 8.34%. These figures change over time; BBS publishes the latest rate every month.
Source: World Bank, via FRED (accessed October 2026)
See the numbers as a table
| Inflation | |
|---|---|
| 2010 | 8.1% |
| 2011 | 11.4% |
| 2012 | 6.2% |
| 2013 | 7.5% |
| 2014 | 7.0% |
| 2015 | 6.2% |
| 2016 | 5.5% |
| 2017 | 5.7% |
| 2018 | 5.5% |
| 2019 | 5.6% |
| 2020 | 5.7% |
| 2021 | 5.6% |
| 2022 | 7.7% |
| 2023 | 9.9% |
| 2024 | 10.5% |
| 2025 | 8.8% |
Why inflation happens
- More demand than supply: when people have more money to spend and goods do not keep up, prices rise.
- Rising costs: when fuel, raw materials or wages go up, producers raise their prices.
- A weaker currency: when the taka loses value, imported goods cost more, and Bangladesh imports a lot.
- Too much money: when money grows much faster than goods in the economy, each taka is worth less.
Worked example
- You put Tk 1,00,000 in a one-year FDR at 10% a year. Interest: Tk 10,000.
- Say 10% tax is deducted at source: you receive Tk 9,000. Total: Tk 1,09,000.
- If inflation that year is 9%, what Tk 1,00,000 bought at the start of the year costs Tk 1,09,000 at the end.
Result: the amount grew, but your buying power stayed about the same. The real gain is roughly zero. Rule of thumb: real return ≈ return after tax − inflation.
Common mistakes
- Thinking “the amount didn’t fall, so I lost nothing”. Losing buying power is a loss too.
- Looking only at the interest rate, without taking out tax and inflation.
- Costing goals 10–20 years away at today’s prices.
- Rushing all your money into something whose risks you don’t understand, out of fear of inflation.
Measure your money’s real gain after inflation: what is left of your after-tax return once inflation is taken away is the real growth.