The central bank's latest monetary policy stance has fittingly put emphasis on inflation control, hewed to financial sector reforms and adopted unconventional policies that support growth, Standard Chartered Bank has said.
The monetary policy for July-December marks a continuation of the central bank's commitment to maintain macroeconomic stability, the international bank said in an analysis.
Policy rates were kept on hold (the repo rate at 7.25 percent and the reverse repo rate at 5.25 percent), and revised economic targets indicate a clear focus on inflation management, according to the analysis.
In the monetary policy unveiled on July 26, the central bank has targeted average inflation at 6.5 percent for fiscal 2015, slightly higher than the government's target of 6 percent. It was 7.4 percent in the previous fiscal year.
"This indicates the central bank's commitment to rein in inflation," the analysis said.
Although the central bank has openly stated that reaching this target could prove difficult, a 6.5 percent target sends the right message on inflation, directionally, the UK-based bank said.
In the previous monetary policy statement, banks have been advised to lend only to creditworthy clients and for productive purposes.
"This suggests that inflation control takes precedence over boosting credit growth at the moment," the analysis said.
The prescription for low domestic private credit growth was a continuation of financial sector reforms and strengthened supervision of the banking system.
"This is the right remedy, in our view, given the deterioration in banks' balance-sheet health."
In the past two fiscal years, private credit growth has fallen short of targets.
"We take this to indicate a shift towards a more conservative monetary policy stance."
The foreign bank also praised several unconventional measures that the central bank has taken to support economic growth.
These include increasing the size of the Export Development Fund, easing restrictions on foreign corporate borrowing within Bangladesh, and measures to promote financial inclusion and bring credit to the grassroots level.
The analysis said inadequate credit risk management and supervision have led to a significant rise in the gross non-performing loans (NPL) ratio, at 10.5 percent in the third quarter of the last fiscal year.
The average NPL ratio stands at 10.7 percent so far this fiscal year, the highest level since fiscal 2009, the analysis said.