Kazi Zahidul Hasan :
Terming the central bank’s new monetary policy as “cautiously accommodative,” experts said the central bank takes the stance amid concerns about the anticipated risks arising from inflationary expectations and unfavourable external developments.
They said the central bank formulate the policy carefully monitoring the overall economic scenario.
“The policy statement was along expected lines. The monetary programmes set at the policy upheld the prevailing macroeconomic situation. It takes liquidity tightening measures in wake of high credit growth to private sector,” former BB Governor Dr Salehuddin Ahmed told The New Nation.
He appreciates BB’s concerns about the anticipated pipeline risks arising from inflationary expectations and unfavourable external developments as cited in the monetary policy statement.
“The immediate objective of monetary policy action is to create credit demand for giving boost to investment and taming inflation. But, I am in doubt whether BB’s policy will help to create the investment appetite for the private sector in an election year as well as control inflationary pressures stemming from the recent development in domestic and external fronts,” he added.
He said BB also kept key rates unchanged as expected. The status quo on repo rate indicates that BB aggressively addressing the growth risks in the economy accruing from high credit growth and choking inflation.
“The new monetary policy also highlighted pockets of weakness in the economy arising from moderate export and remittance growth, significant depreciation of local currency against the greenback and commodity price hike in both domestic and international markets.
BB projects the overall inflation at around 5.7-6.0 per cent in June 2018.
“The tone of the monetary policy stance continues to remain cautious as expected. In particular BB has expressed concern on rise in core inflation,” said former BB Deputy Governor Dr Khandoker Ibrahim Khaled.
He added, “It takes cautious approach to a credit accommodation after inflation picked up bracing a hike in commodity and food prices”.
Dr Khandoker Ibrahim Khaled further said that the central bank looks to build a sustainable and accommodative monetary policy environment keeping in view the present macroeconomic condition.
“BB’s decision to maintain the status quo on policy rates indicates a guarded approach towards monetary easing credit growth and restrain inflation in alignment with market expectations,” he added. He said the private sector credit growth has been projected at 16.8 percent in the monetary policy, which is well enough if a conducive business environment prevails in the country.
“The credit target is sufficient to stimulate private sector investment and inclusive growth,” he added saying an environment conducive to capital investment will not only reduce costs of doing business but also bring price stability ultimately taming inflation. Political stability is a must to maintain a favorable investment climate.
