BB releases monetary policy tomorrow

The central bank unveils its monetary policy for this fiscal year tomorrow (Wednesday) aiming to help revamp the economic activities through the implementation of stimulus packages.

Bangladesh Bank will announce the monetary policy statement (MPS) for the fiscal year 2020-21 on its website to withstand the adverse impact of the Covid-19 pandemic on the economy, officials said.

"We'll release the next MPS on our website on Wednesday along with a statement of the BB governor," an official told FE after the meeting, chaired by governor Fazle Kabir.

Other officials said the next MPS will be an expansionary instead of the existing accommodative one to help the banks manage their funds smoothly amid the Covid-19 pandemic.

As part of the strategies, the central bank is likely to slash repurchase agreement (repo) rate slightly further on the same ground.

The central bank has already cut repo rate, considered policy rate, by 75 basis points to 5.25 per cent in two phases from 6.00 per cent earlier while the reverse repo rate remains unchanged at 4.75 per cent.

Besides, the BB is set to emphasise boosting micro, small and medium enterprises and agriculture loans along with microcredit to help create employment opportunities.

The central bank has already taken a series of measures, including reduction of the cash reserve requirement (CRR) by 150 basis points to 4.0 per cent from 5.50 per cent earlier to facilitate the banks to implement the government's stimulus packages through boosting investment in different productive sectors, the officials said.

Prime Minister Sheikh Hasina has so far announced a total of 19 stimulus packages worth Tk 1.03 trillion to offset the shock of novel coronavirus pandemic on various sectors of the country.

The packages, which are 3.7 per cent of the country's gross domestic product, will be implemented under the supervision of the central bank and the ministry of finance.

For FY '21, the government has set the GDP growth target at 8.2 per cent aiming to keep inflation within 5.4 per cent.

The private sector credit growth target is likely to be fixed considering the overall economic situation along with fund requirement for the government to finance budget deficit, according to the officials.

The latest trend in inflationary pressures on the economy will be considered to determine the private sector credit growth ceiling for FY '21, they added.

The private sector credit growth came down to 8.61 per cent in June 2020 on a year-on-year basis from 8.85 per cent a month ago, the BB data showed.

This growth was 6.19 percentage points lower than the BB's target of 14.80 per cent for FY '20.

The country's average inflation as measured by consumer-price index edged up to 5.65 per cent in June from 5.61 a month earlier. It was 5.48 per cent in June 2019.

The latest situation of the capital market along with foreign exchange and money markets will be included in the next MPS, according to the central bankers.

In the next MPS, the BB may give a signal that its policy support would continue in the coming months for revamping the country's ailing capital market.

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