The Bangladesh Bank (BB) should not go for contractionary monetary policy measures preemptively because of the inflation spikes created by the ongoing crisis in the Middle East (ME), Global Head of Research and Chief Strategist of Standard Chartered Bank (SCB) Eric Robertsen has suggested.
Virtually sharing his views on the H1 2026 Global & Bangladesh Outlook with a select- group of reporters at the SCB's Bangladesh headquarters on Tuesday, he said the current crisis was an energy-related one.
The central bank raising rates was not going to help bring more petroleum products to Bangladesh, meaning the monetary policy measures would not solve the higher inflation challenge at the moment, he said.
Eric Robertsen
He said Bangladesh, as well as a number of economies throughout Asia, needed to watch the growth impact.
They would not want to lose the growth momentum that they had had over the last couple of years because of supply or energy shocks, said the SCB official.
"That is why the central banks need to be very careful that they do not preemptively tighten monetary policy just because they see a little bit of inflation. If the war ends, if the Strait of Hormuz is open, and oil, gas, and refined products start to flow more smoothly, inflation will come down," he maintained.
"But the longer-term impact is on the growth side. So I would expect the central bank to say: we remain vigilant on inflation and inflation expectations, but we will be very sensitive to any downside risk to growth," he added.
Mr Eric said the ongoing crisis in the Gulf countries might cause a risk of higher inflation, weaker growth, policy mistakes, and fiscal deterioration for global economies, the emerging countries in particular.
"I think a credible fiscal plan going forward and credible control of inflation from the central bank is really key," he said.
Responding to a question, Chief Executive Officer of SCB's Bangladesh operations Naser Ezaz Bijoy, who was present in person at the discussion, said a holistic approach was needed, with better coordination among institutions like the central bank, the National Board of Revenue (NBR), the Bangladesh Securities and Exchange Commission, and others.
"The government needs to provide clear and consistent messaging about future policies so that expectations are well managed. Sudden shifts or surprises can create instabilities," he said.
Obviously, the economic challenges for Bangladesh did not start with the current war.
They began during the Covid-19 pandemic, then continued through the Russia-Ukraine war, and the internal factors that resulted in the foreign currency challenges in the country.
So there was an expectation that once the political transition took place, investment would pick up, helping the economy grow faster and increasing revenue collection as economic activities improved, the experienced banker said.
The election did take place quite smoothly. Then this war happened, which had been a significant impediment for Bangladesh, he said.
This situation, Mr Naser said, was even more difficult because fiscal capacity was limited, and all these factors had contributed to a more challenging environment.
"We will have to see how the government and the broader community come together to address these issues."
According to him, all these factors would have an impact on inflation and the cost of doing business.
At the same time, what was even more important was ensuring a stable supply of power and gas, he said.
While cost mattered, an unstable supply situation would be even more damaging, he further said.
"So I think the government's current priority is to ensure a stable supply of energy," he added.
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