Follow tight monetary policy

Economists have suggested continuing the tight monetary-policy stance as the latest power tariff and petroleum product price hikes could heighten inflationary pressure further.
They say although the existing monetary-policy steps are contractionary in nature, the policy is not tight enough to contain inflation as an increased volume of money is being injected into the market through various Bangladesh Bank (BB) instruments.
The observations came at a stakeholders' meeting on Thursday between the Bangladesh Bank and leading economists, senior bankers, and journalists.
The meeting was held before finalising the monetary policy statement for the second half of this calendar year.
The statement will be unveiled on June 30.
A number of people, who attended the closed-door meeting chaired by Bangladesh Bank Governor Md Mostaqur Rahman, told The Financial Express the participating economists called upon the central bank leadership not to ease the existing monetary policy stance under the current macroeconomic situations.
They said easing the stance could take a bigger bite out of people's income by further increasing the inflationary pressure.
An economist said though the prevailing monetary policy stance was still tight as far as a higher policy rate was concerned, the trend of fresh fund injection has been continuing.
At the same time, he said, the government and the banking regulator launched a stimulus package of Tk 600 billion to revive economic activities after months of sluggishness.
"Under such circumstances, the central bank should not think about easing the policy rate, which has been 10 per cent since October 2024. Otherwise, the economy may face further inflationary pressure, which mostly stems from non-monetary factors," he explained.
Another economist said the government had already increased power tariffs and petroleum product prices in phases in less than a month, which would undoubtedly fuel inflation in the coming days.
"If we relax the monetary policy stance right now, it will be disastrous in the context of inflation-battling management," he said.
The economists also suggested the central bank make a foreign exchange strategy considering the future overseas payment pressure as the remittance boom might not continue in the coming months.
As part of the monetary policy stance preparations, the central bank will hold a meeting at its Bogura office tomorrow before holding the monetary policy committee (MPC) meeting on June 21.
Everything in terms of monetary policy measures will be finalised at the June 21 meeting.
Then it is scheduled to be approved by the Bangladesh Bank board of directors on June 25 before being officially announced on June 30.

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