Monetary Policy of Bangladesh

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Submitted By ichha2
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Monetary Policy Statement (July‐December 2012: H1FY13) Executive Summary This issue of the Bangladesh Bank (BB) half yearly Monetary Policy Statement (MPS) outlines the monetary policy stance that BB will pursue in H1 FY13 (July‐December 2012), based on an assessment of global and domestic macro‐economic conditions and outlook. BB’s monetary policy has two major objectives: (i) maintaining inflation at moderate levels and (ii) supporting inclusive growth objectives of the Government. This MPS was preceded by productive consultations with a range of key stakeholders and web‐based comments were also received. In FY10 and FY11 the global economy continued languishing in the aftermath of the 2009 global financial crisis and BB eased monetary policy in order to limit the impact on the Bangladesh economy. Due to this and other pro‐active measures, the Bangladesh economy emerged largely unscathed from this global crisis, averaging over 6% growth between FY09 and FY11. In FY12 the economy faced a different set of challenges related to rising inflation and balance of payments pressures. In order to address these challenges BB’s monetary stance was more restrained than earlier years and yet able to accommodate a private sector credit growth rate which was more than sufficient to meet the initial GDP growth target. The monetary growth targets set in January 2012 were met and the key outcomes – falling inflation and containment of external sector pressures – were achieved. In several respects FY12 was a ‘year of two halves’. The first half (H1FY12) witnessed significant balance of payments pressures due to high global oil prices and low aid disbursements, forcing significant depreciation of the Taka and some foreign reserve depletion. Government’s borrowing from the banking sector also rose…...

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