Bangladesh Bank to keep policy rate high for 6 more months
The Bangladesh Bank wants to maintain the current high policy rate for six more months with the aim of bringing inflation down to a single-digit level, according to its executive director and spokesperson, Husne Ara Shikha.
She was speaking at a press conference at the BB headquarters at Motijheel in the capital Dhaka on Wednesday.
The central bank increased the policy rate by 50 basis points to 10 per cent on October 22, the fifth hike this year.
Since May 2022, the policy rate has risen sharply from 5 per cent in response to persistent inflationary pressures.
Shikha said that if the elevated policy rate was maintained for six more months and the foreign exchange market and supply chain remained stable, inflation could decrease to a single-digit level.
She also said that as inflation subsided, interest rates were also expected to follow suit.
Despite a slight easing to 9.92 per cent in September from a peak of 10.43 per cent in August, inflation has remained high, staying above 9 per cent since March 2023.
Responding to inquiries on banking irregularities, Shikha stated that the Bangladesh Bank was currently prioritising reforms in Shariah-based banks, particularly those which were previously controlled by the S Alam Group, and was working with eleven such banks.
She said that additional banks would be included in future reform efforts, ensuring that all banks gradually come under regulatory scrutiny.
Shikha mentioned that the Bangladesh Bank was providing liquidity assistances to banks facing financial distress and might consider increasing this support if needed.
Recently, the central bank has facilitated a liquidity infusion of Tk 5,585 crore by arranging the fund from 10 financially stable banks and lending the fund to seven weaker banks, with the central bank itself guaranteeing these transactions.
Despite this support, Shikha urged depositors to avoid withdrawing funds more than necessary, stressing that no bank could manage a sudden, large-scale outflow of deposits.
She reassured the public that the central bank’s priority is to restore confidence in the banking system and urged depositors not to panic about the security of their funds.
In addressing the investigation of laundered money, Shikha said that the Bangladesh Bank could only trace funds transferred through official channels, as it was difficult to monitor money sent via informal methods like ‘hundi’.
She added that the Bangladesh Financial Intelligence Unit was working on this issue, but did not share information directly with the Bangladesh Bank.
About efforts on tackling loan irregularities, Shikha said that the BFIU had already frozen several accounts linked to these irregularities, though it had not provided the Bangladesh Bank with detailed information.
Responding to a question on the effectiveness of government task forces established to address various banking challenges, Shikha explained that three dedicated task forces were operational.
‘The first is focused on banking reforms, the second is enhancing the skills of bank staff, and the third is engaged in efforts to recover laundered funds,’ she said.
Source: New Age | 6 November 2024
