Bangladesh's central bank kept its key policy interest rates unchanged on Sunday (29/01), the bank's governor said, citing overall macroeconomic stability and a steady inflation outlook. (Reuters Photo/Mohammad Ponir Hossain)

Bangladesh Central Bank Keeps Policy Rate Unchanged, Sees Inflation Below Target

BY :RUMA PAUL

JANUARY 29, 2017

Dhaka. Bangladesh's central bank kept its key policy interest rates unchanged on Sunday (29/01), the bank's governor said, citing overall macroeconomic stability and a steady inflation outlook.

Governor Fazle Kabir said average inflation was projected to be within 5.3-5.6 percent in June, below the target of 5.8 percent for the 2016-17 financial year that ended in June.

However, a projected rise in global commodity prices in 2017 could continue exerting some upward pressure on domestic prices, he told a news conference while outlining the monetary policy stance for January-June.

"Domestic demand-driven economic activity remains relatively buoyant, as indicated by credit growth, industrial activity, and import trends," Kabir said, adding the central bank projected economic growth to be more than 7 percent for the current financial year.

In January 2016, the central bank cut its key interest rate by half a percentage point for the first time in nearly three years as easing inflation gave it room to help spur economic growth.

Growth sped up to 7.11 percent in the 2015/16 financial year, from 6.5 percent the previous year when political unrest crippled the economy.

Average inflation was 5.92 percent in the 2015-16 financial year, the lowest in 12 years, largely due to a sharp drop in global commodity prices and good agricultural output in the South Asian country of 160 million people.

Broad money and private sector credit growth targets for the current financial year were projected at 15.5 and 16.5 percent, respectively.

Kabir said exports were expected to pick up, with improving growth outlooks in some advanced economies, but that would still be subject to substantial geopolitical risks and policy uncertainties in the United States, Britain and the euro zone.

Exports rose 4.4 percent to $16.8 billion in the July-December period from a year earlier, driven by stronger garment sales.

Steady garment exports, the key driver of Bangladesh's $200 billion-plus economy, helped reserves hit a record of more than $32 billion by the end of December.

Kabir said declining remittances would likely receive a boost from an increase in the number of workers going abroad and from better economic prospects in the Middle East, aided by rising oil prices.

Remittances are Bangladesh's second-biggest source of foreign income but they fell nearly 18 percent to $6 billion in the July-December period.

Reuters

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