Growth-supportive monetary policy in focus

Spadework for framing country's new monetary policy gets going with the central bank focusing measures supportive of maximum economic growth with smooth credit flow into productive sectors. 

The observations on the objectives were made at an internal preparatory meeting on the fresh monetary policy statement (MPS) at the Bangladesh Bank (BB) headquarters Sunday with Governor of the central bank Fazle Kabir in the chair.

All general managers (GMs) and officials above that station of the BB were allowed to attend the initial MPS-preparatory meeting, officials said.

The monetary policy, being formulated under a changed hierarchy in the central bank management, will be effective for the next six months.

The meeting reviewed the country's overall economic situation and came to a decision that the next MPS should be "growth-supportive", ensuring quality credits through strengthening supervision and monitoring by the central bank.

"We'll encourage credit flow only to the productive sectors for achieving maximum economic growth," a BB senior official told the FE after the meeting was over.

He said the central bank is now scrutinising the flow of commercial banks' credits to different sectors and assessing its impact in the context of the country's economic growth.

The latest BB moves came after exceeding the private-sector credit- growth target set in its monetary policy for the January-June period of the outgoing fiscal year.

Already, the growth in private-sector credits reached 15.59 per cent in April on a year-on-year basis from 15.16 per cent in March 2016. The credit growth was 15.11 per cent in February.

The central bankers expect the private-sector credits to grow over 16 per cent by the end of this month.

The BB had projected that lending to the private sector will grow at 14.8 per cent in June 2016 from 13.8 per cent in December 2015.  

Talking to the FE, another BB official said the central bank is formulating the next MPS also giving priority to curbing inflationary pressure on the economy for achieving optimum economic growth.

"We're working to bring down the inflation to 5.8 per cent on 12-month- average basis by the end of the fiscal year (FY) 2016-17 from the existing level," the central banker explained.

The inflation, as measured by consumers' price index (CPI), dropped slightly in the month of May 2016 mainly because of fall in prices of food items amid international market glut.

The inflation rate came down to 5.97 per cent in May from 6.04 per cent of the previous month on a 12-month average, according to Bangladesh Bureau of Statistics (BBS) data. It was 6.10 per cent in March.

On the other hand, the inflation rate also fell to 5.45 per cent during the period under review from 5.61 per cent in April last on point-to-point basis following a declining trend in both food and non-food items.

The core CPI inflation also came down to 8.69 per cent in May last from 8.87 per cent in April on point-to-point basis.

On the other hand, the core inflation rose to 7.92 per cent in May last from 7.73 per cent of the previous month on 12-month average, according to the latest BB report. 

"We're watching closely the recent trends in core inflation," the central banker said, without elaborating.

The BB is measuring the core inflation which excludes non-food and non-fuel components from the CPI.

siddique.islam@gmail.com [Read More]

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Source: The Financial Express


 

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