BB retains cautiously accommodative stance
STAFF REPORTER
Bangladesh Bank (BB) yesterday announced monetary policy statement (MPS) for the second half (H2) of financial year 2016-17 (FY17) maintaining its cautiously accommodative stance and projects of the just outgoing MSP (H1).
The central bank kept itskey policy interest rates unchanged, Governor Fazle Kabir said, citing overall macroeconomic stability and a steady inflation outlook.
Like previous ones, both the private sector credit growth and domestic credit growth targets will remain unchanged at 16.5 per cent and 16.4 per cent respectively by June 2017, BB Governor Fazle Kabir said while announcing the monetary policy for January-June 2017 period at a press conference at the central bank in the capital.
He noted that the MPS, like previous ones, has been prepared after having discussions with a large number of stakeholders to get the latest pulse of the economy, and incorporated their views on the economic constraints and outlook in designing a forward looking monetary policy stance.
In the MPS, the central bank has kept unchanged the average inflation of 5.8 per cent and ceilings of broad money and reserve money growth of 15.5 per cent and 14 per cent respectively. Based on the recent different proxy indicators of the economic activates and economic analysis, the export growth continues positively side by side with rising domestic demand, Fazle Kabir said adding the countrys economy is on the right track to achieve the projected 7.2 per cent GDP growth for the FY17.
The indicated ceilings are deemed to be sufficient to accommodate the projected GDP growth target, even allowing for some unforeseen extra growth spurt, the BB Governor said.
He said the headline CPI inflation has been steadily coming down to 5.52 per cent in December 2016 against the projected within 5.8 per cent in June 2017 benefitting from both favorable food and non-food inflation dynamics.
Bangladesh has achieved a moderate 4.4 per cent export growth in December, 2016 despite the slow demand of Bangladeshi products abroad because of the global economic downturn, he said adding, the inward remittance is maintaining a sluggish trend for different reasons including decline in oil price in the global market.
The BB governor said the central bank has taken various initiatives including forming a committee to find out the causes of falling trend of remittance and expressed the hope that the remittance will return to the rising trend within a short time.
For quite some years, BB is now promoting green financing, fostering financial sector wide a socially responsible financing ethos in line with the governments SDG priorities of an inclusive as well as environmentally sustainable growth. Kabir said BB has now taken up a consultative imitative of formulating Guidance Notes on the dos and donts of socially responsible financing to better foster social cohesion, with output initiatives that promote entrepreneurship, create more and better jobs, and protect environment.
While the recent capital market buoyancy may reflect a recovery from its prior depressed state since 2011, caution is warranted in ensuring that exuberance remains rational.
Fazle Kabir said Bangladesh Securities and Exchange Commission (BSEC) has already taken welcome steps with cautionary messages, financial literacy promotion, and so forth. Some restrictions on margin loans against sponsors shares and shares with abnormally high price earning (PE) ratios may also be desirable. BB is also responding with intensive monitoring about banks abiding by statutory limits on their capital market exposures, he added.
Fazle Kabir further said BB may also direct banks to prevent diversion of business and consumer loans into stock markets and remains ready to take prompt policy actions.
Mentioning the recently bouncing trend of the capital market, he said BB has tightened monitoring to ensure that the banks abide by statutory limits on their capital market exposures.
