New monetary policy announced targeting inflation taming
Staff Reporter :
Bangladesh Bank (BB) increased its policy rate, or repurchase agreement rate, by 25 basis points to 8.0 per cent for containing the inflation as the central bank yesterday unveiled a new monetary policy for the second half (January-June) of the current financial year of 2023-24.
Additionally, the central bank reduced the Standing Lending Facility (SLF) rate by 25 basis points to 9.50 percent from 9.75 percent.
Absorbing excess liquidity from the market, the BB also increased Deposit Facility (SDF) rate by 75 basis points to 6.50 percent from 5.75 percent.
The central bank also announced to introduce the new exchange rate mechanism named the crawling peg rather than free flowing market-driven exchange rate which it eyeing to adopt with its previous monetary policy statement (MPS).
Bangladesh Bank Governor Abdur Rouf Talukder on Wednesday announced the contrctionary policy stance in less than a week after the formation of the new government.
Deputy Governors of Bangladesh Bank, Chief Officer of Bangladesh Financial Intelligence Unit (BFIU), Chief Economist, Executive Director of Research Department, Spokesperson and Assistant Spokespersons of Bangladesh Bank were also present at the program.
The BB also downsized its projected growth rate to 6.5 percent from the initial 7.5 percent considering the ongoing economic status.
At the launch, the central bank lifted the lending rate ceiling by introducing a benchmark reference rate. Based on this, the banks can fix their lending rates.
The BB also narrowed down the credit growth target for the public and private sectors to 31 per cent and 11 per cent respectivelyfor the second half of FY24.
The central bank also revised the projection for inflation upwards to 7.5 percent from 6 percent as consumer prices persistently stayed high.
The BB said it finds itself at a critical juncture as Bangladesh’s economy navigates through the latter half of the fiscal year, facing a multifaceted economic landscape, according to MPS.
“Internally, the economy is striving to restore the stability of the exchange rate and manage the inflationary pressures while dealing with the lingering issue of high non-performing loans,” BB said.
“The increasing costs of essential imports and the strain on the country’s foreign exchange reserves add complexity to the domestic economic challenges,” the policy stance said.
When asked about the conditions of some banks deemed as weak while the governor assumed the office, Abdur Rouf Talukder said that the status of the said banks did not nosedive further due to various measures taken.
In response to the question whether people have developed distrust in keeping money in banks, he said that there is no reason to create distrust. In the 52-year history of Bangladesh, no bank has been closed. There is no possibility that any bank will close down in the future.
