Bangladesh Bank intends to continue its contractionary monetary policy stance to tackle inflation, which has surpassed the annual target and adversely impacted lower- and middle-income individuals. The Monetary Policy Review 2022-23 acknowledges the persistently high inflation and the concern over “unanchored inflation expectations,” indicating the need for an extended contractionary policy period.
The review emphasizes the challenges posed by exchange rate depreciation and elevated production and transportation costs, resulting in sustained domestic inflation despite improvements in supply and declining global commodity prices. Headline CPI inflation reached an 11-year high of 9.52% in August 2022 and remained above 8.0% until April 2023.
The review underscores the importance of anchoring inflation expectations and limiting secondary inflation effects. While credit growth to the private sector moderated due to trade-related credits and weak investment demand, liquidity stress in the banking system led to increased interest rates. Bangladesh Bank remains committed to its proactive monetary policy stance to stabilize the economy, promote growth, and address inflation concerns.
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