Central bank may tighten monetary policy further

FE Team | Published: July 11, 2007 00:00:00 | Updated: February 01, 2018 00:00:00

Siddique Islam
The Bangladesh Bank (BB) is likely to tighten its monetary policy further aiming to curb inflationary pressures on the economy, official sources said.
The central bank may increase the interest rates on some short-term monetary tools like treasury bills to mop up excess liquidity from the banking system in line with the new monetary policy to be released tomorrow (Thursday).
Currently, four treasury bills (T-bills) are being transacted through auctions to adjust the government borrowing from the banking system.
The T-bills are: 28-day, 91-day, 182-day and 364-day.
Besides, the central bank uses Bangladesh Bank Bills in line with its monetary policy.
"Policy interest rate will be increased in the fourth monetary policy," a BB senior official told the FE Tuesday. But the official refrained from giving a clear picture about the implementation of such a policy.
He also said the central bank would give special attention to increase the credit flow to the proper sectors instead of non-productive ones to avoid inflationary pressures.
On June 12 last, the BB Governor Salehuddin Ahmed asked the commercial banks to boost up credit flow, particularly in thrust sectors, for achieving seven per cent growth of gross domestic product (GDP) in fiscal 2007-08.
Finance ministry forecasts a 7.0 per cent GDP growth for the current fiscal.
"We want to keep the inflation rates within 6.5 per cent projected in the current fiscal," the BB official added.
He also said the central bank would also give emphasis on increasing the credit flow to the private sector to create job opportunities through boosting the overall production.
Meanwhile, the country's consumers' price index (CPI) inflation rate came down to 8.05 per cent in May last from 8.28 per cent in the previous month on point-to-point basis.
On the other hand, the inflation rose to 7.06 per cent on annual average basis in May last from 7.02 per cent in April 2007.