Current tightfisted monetary stance may last another six months as the central bank starts crafting its upcoming monetary policy with top priority on curbing inflationary pressure on the economy by keeping exchange rate stable.
Bangladesh Bank (BB) officials dropped hint Sunday as they put their heads together over the overriding monetary matter, adding that all policy rates are likely to remain unchanged in the near future.
The central bank may consider slashing key policy rate after lowering the inflation rate below 10 per cent from the existing level of 10.89 per cent, they added.
"We're formulating the next monetary policy statement (MPS) for the second half (H2) of the current fiscal year (FY), 2024-25, considering inflation both on point-to-point and 12-month-average bases," a senior BB official told the FE.
He also said the central bank was also giving emphasis on dealing with core inflation in preparing the upcoming MPS.
Currently, the central bank is measuring the core inflation, excluding food and fuel components from the consumer price index (CPI).
Latest move comes in the wake of higher inflationary pressure that has hampered the country's overall economic growth in last couple of years.
Meanwhile, inflation as measured by consumer price index eased slightly to 10.89 per cent in the month of December 2024 from 11.38 per cent of the previous month on point-to-point basis due mainly to lower prices of both food and non-food items.
On the other hand, the 12-month-average inflation rose to 10.34 per cent in December 2024 from 10.22 per cent a month before because of higher prices of food and non-food items, according to Bangladesh Bureau of Statistics (BBS)'s latest data.
Similarly, Bangladesh's core inflation came down to 10.29 per cent in December 2024 from 10.48 per cent a month ago on point-to-point basis while such inflation rose to 9.01 per cent from 8.71 per cent on 12-month- average basis.
Inflation in the country has been hovering around more than 9.0 per cent since March 2023, with the central bank's ongoing contractionary monetary policy has yet to cool consumer prices at desired level.
Talking to the FE, Mustafa K Mujeri, executive director of the Institute for Inclusive Finance and Development (InM), suggested taking an integrated approach comparing fiscal, monetary, marketing and exchange- rate policies to curb the inflationary pressure on the economy.
Mr Mujeri, also a former chief economist of the central bank, also advises making competitive the supply chain for ensuring availability of goods on the market.
"It is not possible to contain the inflation through the MPS alone," he explains.
The central bank has already announced a new exchange-management regime aiming to keep the exchange rate of the local currency against the US dollar stable as dear dollar makes imported goods costly and fuels prices up.
"We'll keep the exchange rate stable through strengthening monitoring on the country's foreign- exchange market using the new exchange-rate regime," another central banker says, without elaborating.
As part of the preparations, an internal preparatory meeting on the upcoming MPS was held at the central bank headquarters in the capital on Sunday with Governor Dr Ahsan H. Mansur in the chair.
All executive directors (EDs) and officials above that station of the BB headquarters were eligible to attend the initial MPS-preparatory meeting, according to officials.
At the meeting, Dr Md. Ezazul Islam, an executive director of the BB, gave a presentation on the country's latest macroeconomic situation focusing on inflation, interest rate, exchange rate and liquidity position. The senior officials were also requested to submit their opinions through e-mail within January 18 for preparing the next MPS, they added.
The central bank will organize a stakeholder consultation at a local hotel on January 14 on the monetary policy choices.
All opinions will be placed at the next meeting of the Monetary Policy Committee, which is scheduled to be held at the BB headquarters on January 20.
On January 22, a draft of the MPS will be submitted at the BB board meeting for approval and setting a date for announcing policy to the public. The next monetary policy is expected to be announced by the last week of this month.
A free play within frame on the Bangladesh forex market begins with the central bank starting publishing its reference rate in exchange between the imperious US dollar and Bangladesh Taka (BDT) as per a new exchange-management regime to predict market- representative exchange rate for better understanding of the market operators.
The reference rate stood at Tk 121.6358 each US dollar at 11: 00 AM on Sunday while the rate re-fixed at Tk 121.3956 per greenback at 5:00 pm the same day, according to the official figures.
"It will help market operators to fix their exchange rates each working day," a senior official of the Bangladesh Bank (BB) told the FE wile explaining the advantage of the new regime. He also said the central bank will publish the reference twice a working day.
Bangladesh Foreign Exchange Market Spot Reference Exchange Rate is a transaction-based weighted average rate that comprises foreign-exchange spot transactions of US$ 100,000 or above on the market.
The central bank calculates the daily reference rate considering weighted average rate on the US dollar and BDT of the four types of transactions of all 61 authorized dealer (AD) banks in Bangladesh.
The forex transactions include export-proceeds encashment and commercial remittance, deal details with exchange houses or aggregators for inward remittance, spot foreign-currency (FC) selling covering all deals including letter of credit (LC), service payments, debt service, outbound remittance and inter-bank forex transactions.
The central bank will publish a daily reference benchmark-exchange rate, defined as the weighted average of freely quoted exchange rates in market transactions with customers and other dealers, according to a circular issued by the BB on December 31, 2024.
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