It won’t be able to rein in inflation
The repo rate has been raised so that banks have to pay a bit more interest to borrow from the central bank. It was also necessary to raise the lending rates to control inflation.
If the lending rates could be raised for at least six months, inflation would come under control to some extent. But the central bank did not do anything where it needed to be tightened.
In the monetary policy, it has been stated that inflation will come under control but it lacks the direction how inflation will come under control.
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The reasons for increasing our inflation are the rise in prices of energy and commodities in the world market and supply chain disruptions. But it is not logical to expect that the prices of products, bought for higher prices from the international market, will be lower in the local market.
The private sector credit growth target has been reduced to control inflation. But the step taken by the central bank is just on paper and will not be much effective.
In fact, it is like a toothless tiger. If indicators are not effective then your steps will never work.
Ahsan H Mansur is Executive Director, Policy Research Institute of Bangladesh
