A visiting International Monetary Fund (IMF) mission has advised the Bangladesh Bank (BB) for taking measures to curb non-food inflation through monetary policy.
"Non-food inflation is a signal to the future direction of overall inflation in Bangladesh," the IMF said in a policy note, which was presented on Monday at a seminar, organised by the Chief Economist's Unit of the BB.
It also said the monetary policy should, therefore, pay attention to non-food inflation shocks.
Impact of food price shocks has tended to be transitory and their second-round effects are small, according to the IMF note.
The IMF's latest advice came against the backdrop of rising trend in non-food inflation in recent months.
The country's inflation, as measured by consumers' price index (CPI), eased slightly in January last on both annual average and point-to-point basis mainly because of declining prices of food items.
Food inflation came down to 7.68 per cent in January 2015 from 7.91 per cent of the previous month on the annual average basis while non-food inflation rose to 5.64 per cent from 5.60 per cent, according to the Bangladesh Bureau of Statistics (BBS) data.
"We're empowered to check non-food inflation through demand side management by our monetary policy," a BB senior official told the FE.
The central banker also said the BB generally manages the demand side management of inflation using its monitory policy instruments.
The IMF also observed in another policy note that Taka appreciation against Euro eventually dampens growth of Bangladesh's export to the Euro area but exports are not sensitive to Euro-area income.
"A NEER (nominal effective exchange rate) appreciation is not expected to have a large impact on import demand in Bangladesh, which is mainly driven by domestic activity," IMF mission member Sohrab Rafiq said in his policy note.
On the other hand, Bangladesh's nominal lending rates are broadly in line with global and regional average, according to another policy note, presented by IMF mission member Souvik Gupta.
It also said average nominal and real lending rates are not high by international standard. However, there is scope to reduce those further.
For this, policies should aim at reducing both inflation and stock of non-performing loans, improving loan recovery rates and eliminate NSCs (national savings certificates) or let NSC rate be equal to benchmark deposit rates.
BB Governor Dr Atiur Rahman, deputy governors, executive directors, economic advisor and IMF mission members led by mission chief Rodrigo Cubero and Ms Stella Kaendera, Bangladesh Resident Representative of the IMF attended the seminar.
Siddique.islam@gmail.com
Use monetary policy tools to curb non-food inflation
FE Report | Published: March 10, 2015 00:00:00 | Updated: November 30, 2026 06:01:00
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