Dhaka, Bangladesh (BBN) – The central bank has unveiled its cautiously growth-supportive monetary policy aiming to achieve maximum economic growth through boosting investment particularly in productive sectors.
“We’ve kept the monetary policy stance unchanged as it is growth supportive and cautious for the second-half (H2) of the ongoing fiscal year (FY),” Bangladesh Bank (BB) Governor Fazle Kabir said while formally announcing the monetary policy statement (MPS) for the January-June period of the FY 2016-17 at a press conference held at the BB headquarters in Dhaka Sunday.
Balancing the upside potential and the risks, the central bank maintains the current policy stance: repo and reverse repo rates will remain unchanged at 4.75 per cent and 6.75 per cent, respectively to support growth while mitigating inflation risks.
The central bank of Bangladesh also kept unchanged the private-sector credit-growth target at 16.50 per cent for the H2 of FY 17 against the backdrop of lower growth of the same than target, set by it in the monetary policy, for the July-December period of the FY 17.
The growth in credit flow to private sector came down to 15.01 per cent in November 2016 on a year-on-year basis from 15.20 per cent a month ago. It was 15.34 per cent in September 2016.
Earlier, the BB projected that private-sector credit would grow at 16.60 per cent in December 2016 and 16.50 per cent in June 2017 respectively.
The monetary program framework is based on the ceilings for broad money and reserve money growth of 15.5 per cent and 14.0 per cent respectively, according to the MPS.
The MPS also said this is consistent with domestic credit growth within 16.4 per cent and private sector credit growth within 16.5 per cent by June 2017.
“These are indicative ceilings deemed sufficient to accommodate projected GDP growth target, even allowing for some unforeseen extra growth spurt,” it explained.
Regarding the stock market movement, the central bank is responding with intensive monitoring about banks abiding by statutory limits on their capital market exposures.
“The BB may also direct the banks to prevent diversion of business and consumer loans into stock markets and remains ready to take prompt policy actions,” the MPS noted.