BB to guard against inflation in first half

• KEY ASPECTS OF MPS

• Repo, reverse repo rates and CRR to be kept unchanged 

• Prices to be kept in check as inflation may rise

• Disbursement of quality credit to be ensured to thwart loan scams 

• Job creation to be encouraged by injecting funds into productive sector

The central bank is set to bring down the private sector credit growth target for the first half of 2019 slightly with a view to containing inflationary pressure.

The monetary policy for the January to June period will be announced today by Bangladesh Bank Governor Fazle Kabir.

Although inflation dropped to a 19-month low in December last year, there are fears it will surge surrounding the post-election optimism.

In the monetary policy for the second half of 2018, the private sector credit growth was set at 16.80 percent.

“It will be lowered by 0.10 to 0.20 percentage points,” Jamaluddin Ahmed, a director of the central bank board, told The Daily Star yesterday.

He, however, said the revised target will not raise the alarms on the private sector as it will be above 16 percent, which is good enough for achieving the 7.8 percent GDP growth the government is aiming for this fiscal year.

The forthcoming monetary policy will focus on ensuring the disbursement of quality credit and tackling the upward trend of core inflation, Ahmed said. The country's foreign trade may reach $100 billion this year, which will play in important role in helping the BB take a cautious monetary policy for the first half of the year, said a BB official. 

In the first four months of the fiscal year, exports soared 16.75 percent year-on-year to $16.77 billion. During the period, imports increased 6.64 percent to $23.43 billion.

Remittance, too, increased during the period: by 9.03 percent to $6.28 billion.

“That's why caution is being exercised,” the BB official said, adding that the repurchase agreement (repo) and reverse repo policy rates and cash reserve requirement will be kept unchanged.

The central bank reduced its repo rate by 75 basis points to 6 percent and slashed the CRR by one percentage point to 5.5 percent on April 15 last year in the wake of huge pressure from the sponsors of private banks.

Majority of the banks are now keeping their attention to adjust their loan-deposit ratio by March this year in line with the central bank directive, which has subsequently put a negative impact on the private sector credit growth in recent months.

The private sector credit growth stood at 13.20 percent in December last year, after being on the slide since May.

As per the central bank's instruction, conventional banks will have to bring down the loan-deposit ratio to within 83.50 percent from their existing ceiling of 85 percent and Shariah banks to 89 percent from 90 percent.

“Only disbursement of quality credit can ensure sustainable development and create more jobs in the productive sector. So, the upcoming MPS will focus on the issue,” the BB official added.