Dhaka, Bangladesh (BBN)- Bangladesh Bank (BB) on Tuesday unveiled its cautiously accommodative monetary policy aiming to achieve maximum economic growth through boosting investment particularly in productive sectors.
“The monetary policy is cautiously accommodative,” BB Governor Fazle Kabir said while formally announcing the monetary policy statement (MPS) for the July-December of the current fiscal year (FY) 2016-17 at a press conference held at the central bank headquarters in Dhaka.
Mr. Kabir believed that the MPS will support and advance the momentum of inclusive, equitable and environmentally sustainable growth, further consolidating inflation moderation and macroeconomic stability.
“The main objective of Bangladesh Bank’s monetary policy is moderation and stabilization of CPI ((consumers’ price index) inflation alongside supporting output and employment growth,” the central bank said.
The BB’s monetary and financial policies will continue supporting inclusive, environmentally sustainable growth; addressing its developmental role in the longer term risks to macro-financial stability, according to the MPS.
The central bank increased the private-sector credit-growth target substantially for the FY 17 aiming to achieve maximum economic growth through boosting investment in the private sector.
Private sector credit growth is projected to grow by 16.5 per cent by the end of FY 17, against 14.8 per cent of FY 16. But it has been estimated at 16.6 per cent for the H1 of FY 17.
Private sector credit growth has shown an uptrend at the end of the FY 16. While it was 10.8 per cent in June 2013, private credit growth reached as high as 16.4 per cent in May of the FY 16.
“The target of 16.5 per cent private credit growth appears to be adequate to support output growth ranging from 7.1 to 7.3 per cent – Bangladesh Bank forecasts for the FY 17 where the government’s 7.2 per cent output growth target nicely fits in,” the central bank explained.
Talking to BBN, a BB senior official said the central bank is now working to bring down the inflation to 5.8 per cent on 12-month- average basis by the end of the fiscal year (FY) 2016-17 from the existing level.
The central bank said downward edging annual average CPI inflation eased to 5.9 per cent in June 2016. “But its higher nonfood component is under pressure from wage gains of rural laborers and public employees; offset somewhat by continuing moderate trends of global commodity prices.”
This, coupled with proactive management of market liquidity, is expected to keep FY 17 CPI inflation at or close to the 5.8 per cent target level, it added.
The inflation, as measured by CPI, dropped slightly in the month of June 2016 mainly because of fall in prices of food items amid international market glut.
The inflation rate came down to 5.92 per cent in June from 5.97 per cent of the previous month on a 12-month average, according to Bangladesh Bureau of Statistics (BBS) data. It was 6.04 per cent in April last.
On the other hand, the inflation rate rose to 5.53 per cent during the period under review from 5.45 per cent in May last on point-to-point basis mainly due to rising trend in non-food items.
The core CPI inflation came down to 8.21 per cent in June last from 8.69 per cent in May on point-to-point basis.
On the other hand, the core inflation rose to 8.04 per cent in June 2016 from 7.92 per cent of the previous month on 12-month average, according to the latest BB report.
"We're watching closely the recent trends in core inflation," the central banker said, without elaborating.
The central bank of Bangladesh is measuring the core inflation which excludes non-food and non-fuel components from the CPI.
The BB’s policy interest rates including repo and reverse will continue to remain unchanged at the current levels of 6.75 and 4.75 per cent, respectively.
BBN/SSR/AD