Kazi Zahidul Hasan :
The central bank is likely to announce a ‘cautious’ monetary policy for the first half of the current calendar year for fear of rising inflation during the National Election.
Bangladesh Bank Governor Dr Fazle Kabir will announce the new monetary policy on January 31 followed by a press briefing.
BB officials said, the central bank’s monetary policy committee has suggested for treading a cautious path, while formulating the monetary policy in an election year.
They said, there is little chance of a rate cut in the near term as inflation is expected to inch upwards
“We will put a cautious approach in formulating the monetary policy considering inflationary pressure in a election year and possible volatility in global markets,” a senior BB official told The New Nation yesterday, asking not to be named.
The point- to- point inflation edged up by 5.83 percent in December last year from 5.03 percent in December 2016 driven by higher food prices.
Inflation is expected to be above six percent in June 2018, according to the BB’s latest inflation expectation survey. The projection shows the average annual inflation for the first half of the fiscal year would be 5.5-5.9 percent.
“The rising inflation is a cause of concern because it may lead to a higher borrowing cost and cost of living and thereby affecting the entire economy,” said the BB official.
He said that the key focus of the bi-annual monetary policy (January-June) would be taming inflation and promoting a higher economic growth.
“We will take cautious and restrained monetary stance considering the prevailing economic conditions of the country,” he said adding, “It will help ensure adequate credit to private sector credit growth and prevent flow on excess credit to unproductive sectors.”
The BB official also said, the rising value of greenback against local currency has pushed up import cost of goods and commodities pushing up their prices in the domestic market. It is also fuelling inflation.
“A prudent and flexible monetary programme will put in place to bring stability in forex market,” he said.
In its previous monetary policy the BB said, the food price uptrend caused by the flash flood in the last quarter of fiscal 2016-17 poses risks of inflation.
“Looking ahead, given the domestic inflation dynamics, food price developments and tapering base effects, some price pressures may emerge during fiscal 2017-18 and will need to be monitored and contained carefully,” said the monetary policy statement of the BB.
