The central bank of Bangladesh held its benchmark repurchase rate steady at 7.25 percent, but said "easing will be considered after point-to-point headline general inflation and core CPI inflation take a sustained declining trend."
The Bangladesh Bank, which has maintained its rate since February 2013, said the current level of inflation is "moderate," but the government's 6.2 percent target for fiscal 2016, which began on July 1, "implies that we need to go for further reduction by slightly pressing the brake on the price level."
The current level of money supply in Bangladesh is cautious but at the same time "generously accommodative for growth generating pursuits," the bank said.
The central bank said general inflation eased to 6.40 percent in June from 6.87 percent in January but core inflation rose to 6.74 percent from 6.08 percent in January, warranting a cautious policy stance.
"Gains in inflation declined earned over this period do not yet make a case for easing of policy interest rats, given that both headline point-to-point CPI inflation and core CPI inflation have edged up recently," the bank said, attributing the fall in inflation to declining food prices.
The bank added that the fall in global fuel prices may have played a role in dampening inflationary concerns but the government did not adjust prices. Given that food occupies almost 60 percent of the consumption basket, this played a major role in pulling down inflation.
The government of Bangladesh is targeting 7 percent economic growth in fiscal 2016 compared with an estimated 6.5 percent in fiscal 2015.
Gross Domestic Product in 2014 grew by 6.12 percent in calendar 2014 and policymakers are aiming to break out of the pattern of growth around 6 percent that has persisted for the past 12 years.
Bangladesh Bank issued the following highlights in its monetary policy statement for July-December 2015:
This is a cautious but explicitly pro-growth monetary policy stance supporting the
7 percent growth target and the 6.2 percent inflation target for the fiscal year
Reserve money is projected to grow at 16 percent and broad money (M2) at 15.6
percent which are adequate to support the growth and inflation targets. It has
also taken the growth rates of both public and private credit into account.
Domestic credit is projected to grow at 16.5 percent at the end of the fiscal year
2016. Private sector credit is projected to grow at 15 percent and public sector
credit at 23.7 percent.
This is a growth supportive monetary policy that promotes investments through
the strategy of selective easing.
Policy interest rates (repo, reverse repo) will remain unchanged, but easing will
be considered after point-to-point headline general inflation and core CPI
inflation take a sustained declining trend.
Bangladesh Bank's supervisory vigilance on banking governance will be
straightened further to clamp down on loan delinquencies.
Besides already ongoing inclusive financing for farm and nonfarm small and
medium enterprises (SMEs) and the export development (EDF) fund support for
exporters, new medium to longer term financing windows totaling USD 500
million will be opened in the fiscal year 2016 for financing of manufacturing
enterprises, and for greening initiatives in the export oriented textiles, apparels,
and leather sectors.
As before, Bangladesh Bank's monetary and financial policy stance remains
grounded on the developmental central banking mandate enshrined in its