Economists advise maintaining policy rate amid inflation concerns

Economists have advised the central bank governor not to cut the policy rate in the upcoming monetary policy, citing the state of the economy and persistently high inflation. 

They said the policy rate should remain unchanged at current 10%, urging the central bank to maintain its current stance until inflation is brought down sustainably.

The views were expressed at a "Monetary Policy Consultation Meeting" held at Bangladesh Bank headquarters in Dhaka today (4 June), where Governor Md Mostaqur Rahman met economists and bankers to discuss the monetary policy outlook for July-December period.

Economists said inflation remains high and controlling it is primarily the responsibility of Bangladesh Bank and lowering the rate would be inappropriate under the circumstances. 

Meeting participants said they also cautioned that recent increases in fuel and electricity prices are likely to add further inflationary pressure. 

They specifically noted that the recent adjustment in energy prices would have a direct impact on inflation, reinforcing the need for a cautious monetary stance. 

The economists also urged the central bank to ensure swift implementation of its Tk60,000 crore stimulus package aimed at boosting production, supporting exports, expanding the private sector, creating jobs and accelerating economic recovery. 

They said the funds must be disbursed under strict compliance to avoid irregularities, warning against a repeat of the misuse and corruption seen in pandemic-era disbursements.

They said stronger coordination between monetary and fiscal policy is needed, arguing that interest rate adjustments alone would not be effective without policy alignment. They also said tighter market monitoring is essential for monetary measures to work effectively.

Participants noted that private sector credit growth remains weak, and policy reforms to stimulate business expansion are needed. They also said maintaining confidence in the banking sector is crucial for economic stability, as it remains a key pillar of the economy.

In response, the governor said Bangladesh Bank would continue banking sector reforms. He also said chairpersons and managing directors of merged banks would be appointed soon.

On the foreign exchange market, economists advised careful policy decisions. 

They said remittance inflow is satisfactory, but cautioned that future demand for dollars may rise as investment and import activity increase, while remittance may not remain stable.