Formulating a new monetary policy for Bangladesh was underway on Monday with top priority on curbing inflation and helping productive sectors for achieving maximum economic growth.
The priorities were suggested in an internal meeting on the monetary policy statement (MPS) at the Bangladesh Bank (BB) headquarters on Monday, with governor Fazle Kabir in the chair.
The meeting reviewed the country's overall economic situation and suggested that the next MPS for fiscal year 2022-23 should be a cautious instead of the ongoing expansionary monetary policy, with inflation held in check at reasonable levels.
The meeting also emphasized strengthening monitoring and supervision for bringing stability in the country's foreign-exchange (forex) market.
The latest move by the central bank came against the backdrop of rising inflationary pressure on the economy in recent months, following higher prices of both food and non-food items.
Inflation as measured by consumer price index (CPI) rose to 5.81% in April 2022 on a 12-month-average basis from 5.75% a month before, according to the latest data of the Bangladesh Bureau of Statistics (BBS).
Food inflation stood at 5.53% during the period under review from 5.47% in March 2022 while non-food inflation rose to 6.26% on a 12-month average basis from 6.19%.
Economists say that actual inflation could be higher than the BBS estimate as it has been using 2005-2006 prices for years to calculate the consumer price index.
Most countries, including Bangladesh, faced inflationary pressure on their economies following a fresh hike in prices of essential commodities, including fuel oils, on the global market mainly due to the ongoing Russia-Ukraine war.
Meanwhile, core inflation has already crossed 7% after nearly seven years mainly due to higher transport costs, the officials added.
The core inflation rose to 7.10% in April 2022 on a 12-month average from 7.02% a month ago, according to the central bank's latest statistics.
Currently, it is measuring the core inflation which excludes food and fuel components from consumers' price index (CPI).
The central bank usually puts emphasis on the latest trend of core inflation for preparing its monetary policy, said officials.
In the next MPS, the central bank will also focus on boosting micro, small and medium enterprises (MSMEs) and agriculture loans along with microcredit to create employment opportunities across the country.
The latest situation of the capital market along with both foreign-exchange and money markets will be considered in the next MPS, the meeting participants added.
They also said the central bank will also help ensure access to finance for marginal people through boosting financial inclusion campaigns across the country.
Private-sector credit growth is likely to be fixed for FY23 considering GDP and inflationary pressure on the economy.
Credit flow into Bangladesh's private sector increased further in April following rising demand for loans, particularly for trade financing, to settle import payment obligations.
The credit flow rose to 12.48% in April 2022 on a year-on-year basis, from 11.29% a month before, according to the central bank's latest statistics.
It was 2.32-percentage points lower than the central bank target of 14.80% for the second half of current FY22.