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DIU-JOURNAL OF BUSINESS AND ENTREPRENEURSHIP

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Paper Title
Salient Features of the Monetary Policy Statement of Bangladesh Bank

Authors

Imam Abu Sayed

Abstract

In preparing the Bangladesh Bank (BB) Monetary Policy Statement (MPS), a participatory approach is followed. Economists, bankers, journalists, BB high officials, and think tanks, for example, as a stakeholder, provide opinions for the formulation of MPS. Following the fundamentals and essence of technical analysis, the stakeholders of MPS form rational expectations about GDP, inflation, interest rate and exchange rate. Global and domestic development and trends of economic and financial variables are lucidly analyzed in MPS. In order to realize the desired real GDP and CPI inflation, BB monitors, among others, the interbank call money rate, bearing in mind the overall liquidity of the banking system with the necessary impact on the exchange rate. Banks loanable funds are deployed to the private and public sectors, consulting micro and macro prudential policies for optimum use of banking resources for higher output with tolerable inflation and creating employment. Accordingly, a six-month moving average rate of Treasury bill (SMART) is considered for determining banks’ and financial institutions’ deposit and lending rates along with small and medium-sized enterprises (SME) loan rates, for instance. Long-term government bond rate stability is also maintained for favorable outcomes in the capital market as well. Principally, BB is in the stage of introducing interest rate targeting monetary policy following inflation rate targeting for maintaining monetary and financial stability and ensuring the welfare of the economy. Consequently, fundamental analysis observing technical analysis is performed in this paper, briefly highlighting the MPS to form rational expectations by the stakeholders.

Keywords

Money supply (M2), Monetary policy, Central bank, Policies, Macroeconomics.

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