Tuesday, July 31, 2018

CORRECTED-Bangladesh maintains key rates as inflation under control

      (Following item is corrected to make clear Bangladesh Bank lowered its repo rate in April, not in June)      
      The central bank of Bangladesh left its key policy rates steady for the first half of the 2019 financial year, which began July 1, and set growth ceilings for private credit, domestic credit and broad money at 16.8, 15.9 and 12.0 percent, respectively.
       Bangladesh Bank (BB), which lowered the repo rate by 75 basis points to 6.0 percent and the cash reserve ratio by 1 percentage point in April to ease tightening liquidity, added the targets for credit and broad money would be sufficient to accommodate real Gross Domestic Product growth of up to 7.8 percent and average inflation of up to 5.8 percent in fiscal 2019.
       "Balancing the inflation and output risks, amid improving liquidity conditions and moderating food inflation while inflation expectations are elevated and global market conditions tighter, BB has decided to maintain the policy rates at their current levels, with repo and reverse repo rates at 6.0 and 4.75 percent, respectively," the central bank said in its monetary policy statement for the first half of fiscal 2019 from July to December, 2018.
       BB added it would continue with intensive and intrusive supervision to ensure that credit flows to the priority sectors of agriculture, manufacturing and small and medium-sized enterprises.
       In fiscal 2018 Bangladesh's economy grew 7.65 percent,  above the 7.4 percent target and up from 7.28 percent in fiscal 2017, and inflation averaged 5.78 percent, slightly above the 5.5 percent goal, reflecting weather-related shocks and rising global inflation.
       Despite a rise in food inflation in June to over 7 percent, BB said inflationary concerns remained largely under control in FY18 as broad money, the key determinant of inflation, grew 9.2 percent, well below the monetary program target of 13.3 percent.
       Private sector credit growth, despite recent moderation, remained strong at 16.95 percent in June, slightly above the FY18 target of 16.8 percent, but domestic credit growth reached 14.6 percent, below the target of 15.8 percent.
       In June the International Monetary Fund (IMF) said Bangladesh's economy was performing well with inflation stable, strong growth, moderate public debt and greater resilience to external shocks.
       Economic growth accelerated to 7.3 percent in FY17, which ended Sept. 30, from 7.1 percent in the previous fiscal year. Growth is projected at 7 percent in FY18 and inflation is expected to remain close to BB's target at 5.9 percent as flood-related pressure on food prices eases with the recovery of the rice harvest.




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