The central bank is set to unveil a 'cautious' monetary policy for the next fiscal year (FY), 2022-23, today (Thursday) - to curb inflation without hampering the country's economic growth, officials said.
Outgoing Governor of Bangladesh Bank (BB) Fazle Kabir will announce the monetary policy statement (MPS) for FY 23 at 3:00 pm, giving top priority to curbing inflation and helping productive sectors for achieving maximum economic growth.
As part of the cautious monetary policy stance, the central bank is likely to make the lending rate cap flexible for containing inflation through reducing import payment pressure on the economy.
Officials explained that fund would be costlier, if the BB enhances the lending rate ceiling, considering the ongoing rising trend of inflation.
Earlier, the central bank instructed all the scheduled banks to fix a maximum 9.0 per cent interest rate on all loans, except credit cards, as part of the government's initiative to bring down the rate to single digit from April 01, 2020.
Besides, the banks had been directed to fix interest rates on term deposits with maturity periods of three months and above at rates not less than the rate of inflation - published three months before.
Senior economists along with the International Monetary Fund (IMF) already suggested the policymakers for phasing out cap on the lending and borrowing rates to help strengthen monetary transmission.
On the other hand, the repurchase agreement (repo) rate may rise further in the next MPS on the same ground, the officials hinted.
On May 29, the central bank increased its key interest rate for the first time in a decade to contain inflation, as it raised the repo rate by 25 basis points to 5.0 per cent.
The BB's latest moves came against the backdrop of rising trend in the inflationary pressure on the economy in recent months, following higher prices of both food and non-food items in lockstep with their global price rise.
The inflation - as measured by consumer price index (CPI) - rose to 5.99 per cent in May 2022 on a 12-month-average basis from 5.81 per cent a month before, according to the Bangladesh Bureau of Statistics (BBS) latest data.
Credit growth target for the private sector may remain almost unchanged for the next FY, considering the high prices of essential commodities in the global market.
Meanwhile, credit flow into Bangladesh's private sector increased further in May 2022 - following rising demand for loans, particularly for trade financing, to settle import-payment obligations.
The credit flow rose to 12.94 per cent in May on a year-on-year basis, from 12.48 per cent a month before, according to the central bank's latest statistics.
It was 1.86-percentage-point lower than the BB's target of 14.80 per cent for the second half (H2) of the outgoing fiscal.
In the next MPS, the central bank is likely to reaffirm its supportive roles to help develop the country's capital market.
The latest situation of both foreign exchange and money market would be emphasised in the upcoming MPS, according to the officials.
On July 29 last year, the central bank announced an expansionary as well as accommodative monetary policy stance for FY 22 - for offsetting adverse impact of the coronavirus pandemic on the economy along with creating fresh employment opportunities in the country.