Bangladesh Bank expresses concerns amid more than 9% inflation rate
05 Apr 24 2 min read
Insights
- Regarding overall economic performance, BB forecasts relatively slower growth in industrial sector due to decreased external demand.
- Agriculture sector is expected to perform better, while service sector maintains moderate growth trajectory, buoyed by robust remittance inflows.
- The WB projected inflation to remain elevated at 9.6 per cent for fiscal 2023-24.
The central bank warned that reducing inflation to a tolerable level might require prolonged monetary tightening even as consumer prices continue to erode purchasing power and burden private consumption, a trend expected to persist throughout the fiscal year, according to international forecasts.
The World Bank projected inflation to remain elevated at 9.6 per cent for fiscal 2023-24, moderating to 8.6 per cent in FY 2024-25. However, it emphasised that the inflation trajectory hinges on the transmission of BB’s contractionary monetary policy and the government’s fiscal stance, as stated in the Bangladesh Development Update.
Bangladesh Bank’s quarterly report for October-December 2023 underscored its utmost priority on inflation containment. The central bank raised the policy interest rate to 8 per cent on January 21 to curb inflation, ensuring adequate funding to productive sectors for desired growth.
The central bank commits to continued monetary tightening until inflation reaches the desired level. Despite the government revising its inflation target upward to 7.5 per cent, average inflation stood at 9.66 per cent until February.
The BB collaborates with the government to combat inflation, maintaining a restrictive monetary stance and adopting a unified exchange rate policy even as collective efforts aim to mitigate supply constraints caused by syndication and hoarding.
While being optimistic about the future, BB acknowledges potential challenges like geopolitical tensions and economic slowdowns in trading partners even as vigilance and strategic planning are deemed imperative to navigate economic fluctuations effectively.
Regarding overall economic performance, BB forecasts relatively slower growth in the industrial sector due to decreased external demand. However, the agriculture sector is expected to perform better, while the service sector maintains a moderate growth trajectory, buoyed by robust remittance inflows stimulating economic activities.
Fibre2Fashion News Desk (DR)
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