BB sits with economists tomorrow

JUBAIR HASAN
Bangladesh Bank now decides to sit with leading economists and think tanks tomorrow (Saturday) to discuss the crisis-management strategies in the wake of war against Iran by the Israel-USA coalition.
The central bank's decision came just a day after the postponement of the Monetary Policy Committee (MPC) meeting, which was convened to revise its policy rate.
Just a few days after taking charge of the central bank head, BB Governor Mostaqur Rahman convened the MPC meeting on Wednesday last in order to readjust the higher policy rate, but the meeting was postponed due to an unknown reason.
But BB sources said the MPC meeting was called at a time when international trade activities were in trouble as the war in the Middle East had already pushed global oil prices up and raised concerns about wider economic disruption.
When contacted, a MPC member and Director General of Bangladesh Institute of Development Studies (BIDS) Dr. AK Enamul Haque said the MPC meeting was called in short notice recently but it was cancelled later.
"I don't know the exact reason behind the postponement of the meeting. I have also heard that the meeting may take place after Eid-ul-Fitr," the economist said.
Preferring anonymity, a BB official said the policy rate was to be curtailed by 25 to 50 basis points on the stalled Wednesday's MPC meeting.
"Such a sudden decision about the rate cut surprised many of us in the current domestic and international context. Thankfully, the meeting was called off," he said.
The central banker said the BB might have backtracked from its move, fearing criticism that such a decision could contribute to rising inflation.
Before doing so, the banking regulator has now decided to hold a meeting with the economists and think-tanks to assess the overall situations and spillover consequences of the war against Iran before chalking out crisis management strategies to overcome possible impacts of the war on trades and businesses on Bangladesh.
Apart from the central bankers, the sudden MPC meeting also surprised economists and money market analysts. According to them, the regulator should have observed the emerging situation in the Middle Eastern and also the country's inflation trend.
Former lead economist of World Bank's Dhaka Office Dr. Zahid Hussain said there is no logic for lessening the policy rate right at the moment because the inflation is on the rising trend while global trade has badly impacted due to the ongoing tension in the Middle East.
Under the circumstances, he said, the cost of doing business is likely to go up because of rising energy prices, shipping cost and higher insurance premium, which could put pressure on BoP (balance of payment) in the coming days.
He also said the countries that were going through rate reduction in recent time now pause any fresh move, considering the emerging global situation.
"I think we should wait further. Otherwise we might be in trouble in the coming days," he added.
Director General of Bangladesh Institute of Bank Management (BIBM) Dr. Md. Ezazul Islam said it will not be a wise decision to cut the policy rate right now because of ongoing domestic and global factors.
He further said the inflation has been on the upward trend for the last few months despite maintaining the higher policy rate while the government's domestic borrowing might increase further in the coming days.
Simultaneously, the oil prices in the international markets show an uptrend following the war that badly disrupted the global supply chain.
"I think the BB should remain cautious and it should not go for growth-supportive policies now," he added.
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