Bangladesh Bank to Unveil New Monetary Policy Amid Shift towards Economic Growth

Bangladesh Bank, the central bank, is set to release its new monetary policy by the end of July, marking a potential shift from its contractionary stance to a more growth-oriented approach. Business leaders are pinning their hopes on a more investment-friendly regime with lower lending rates and continued political stability. The central bank is fine-tuning its strategy to balance curbing inflation and reviving private investment, amid increasing calls for a more lenient monetary policy.

Key Takeaways:

• The new monetary policy is expected to be more business-friendly, with a focus on increasing credit flow and reducing interest rates.
• The current policy rate of 10 per cent has been criticized for choking off investment momentum and driving up borrowing costs.
• Economists warn that inflation cannot be solely controlled through monetary tightening, and effective supply chain management is also crucial.
• Private-sector credit growth has been languishing below 8 per cent, due to exchange-rate pressures, taka depreciation, and elevated borrowing costs.
• The central bank is considering a more accommodating policy stance to boost economic activity, despite the risks of inflation flare-ups.

Statistics:

• Policy rate has been increased from 8.5 per cent to 10 per cent to contain soaring consumer prices.
• Private-sector credit growth has slowed down to below 8 per cent due to various factors.
• Business leaders are pinning their hopes on a more lenient monetary policy to increase credit flow.
• The central bank has achieved two of its three key factors, with inflation managed to be reduced somewhat.

Sources:

• DCCI President Taskin Ahmed
• Bangladesh Bank Spokesperson Arif Hossain Khan
• Masrur Reaz, Chairman of the Policy Exchange Bangladesh
• International Monetary Fund (IMF)
• Bangladesh Bank records