BB may announce tight monetary policy in July

FE Team | Published: June 21, 2007 00:00:00 | Updated: February 01, 2018 00:00:00

Bangladesh Bank (BB) is expected to announce a tight monetary policy early next month, a senior official said Wednesday, reports bdnews24.com.
"We expect to make an official announcement by July 7. There will be no major shift from our present stance on monetary policy amid inflationary expectations," the central bank official told the news agency on condition of anonymity.
Bangladesh Bank currently follows a cautious and controlled approach aimed at containing the average inflation below 7.0 per cent for fiscal 2006-07, which ends this month.
To offset demand surges, the BB kept its credit growth target for the private sector at 14 per cent for the outgoing fiscal year, down from 15 per cent a year ago.
The official said monetary policy for the July to December period of FY 2008 should not affect credit growth in the private sector too much, although credit to the sector is going over Bangladesh Bank's target this fiscal year.
"We will not pursue further tightening as it may affect the growth outlook," the official said. The government has projected a 7.0 per cent economic growth for FY '08.
"Demand factors are not solely responsible for pushing inflationary expectations in the economy. Supply factors have also been contributing to the surge in inflation," he added.
Annual inflation rose from 6.94 per cent in March to 7.02 per cent in April. The month-to-month rate rose to a nine year high of 8.28 per cent in April from its 7.43 per cent level the previous month, according to the Bangladesh Bureau of Statistics.
The Bangladesh Bank official said that the central bank would target a reduction in inflation to 6.5 per cent, in line with government targets.
Reverse repo and repo rates, routinely employed instruments for influencing financial and real sector prices, might be raised to between 10 and 20 basis points. This will mop up excess liquidity from the market, the official added.
The interest rate for various tenure reverse repos is now at 6.5 per cent. Bangladesh Bank raised the overnight reverse repo rates in September last year.
"But there is no possibility to increase the cash reserve ratio or statutory liquidity ratio for the next six months as it will directly influence available volumes of credit," he said.