BB governor signals possible January rate hike if inflation persists

The Bangladesh Bank may go for further monetary tightening if the country sees no improvement in inflation by next month, said Bangladesh Bank Governor Ahsan H Mansur.

While speaking at the "Bangladesh Investors Conference 2024" in the capital on Thursday, he elaborated on the present state of the macroeconomic scenario and the measures to bring down inflation to 7% by June and to 5% in the subsequent fiscal year.

The general point-to-point inflation rate in November reached 11.38%, up from 10.87% in October.

As inflation remained stubbornly high, the Bangladesh Bank on 22 October raised its policy rate once again in less than a month, pushing it to 10% to make money costlier further.

The governor said the inflation-tightening measures typically take around 12 months to be reflected in the inflation.

"If inflation doesn't come down by January, we have to tighten the policy further," he said.

No money has been printed in the last three months, he said, adding that alongside liquidity support to the problem banks for retaining the depositors' confidence, the central bank is withdrawing liquidity from banks through bonds to control money supply and curb inflationary pressures.

Blaming the prolonged monsoon and flood this year that hurt agro production, the governor expected that the vegetables and crops to be harvested in winter would help drag down inflation.

The government also lifted import duties on some essential commodities that should help, he said.

Zahid Hussain, former lead economist of the World Bank's Dhaka office, in his keynote, said a drop in dollar price would help ease inflation.

He, however, suggested "market policing" to curb inflation, instead of only depending on monetary policy.

The investors' conference was organised by BRAC EPL Stock Brokerage, in collaboration with Asian Tiger (AT) Capital Partners.

The BB governor said the economic challenges together like a perfect storm as the stress on external accounts, inflation and difficulties within the banking sector converged at the same time in Bangladesh, coupling with political uncertainties.

University of London Professor Mushtaq Husain Khan blamed the lack of good governance that had increased corruption during the previous government.

He also criticised the politicisation of the business forums and the emerging need for political power in business.  

Association of Bankers Bangladesh Chairman and BRAC Bank Managing Director Selim RF Hussain, Policy Exchange Bangladesh Chairman M Masrur Reaz, and DSE Brokers Association of Bangladesh President Saiful Islam were among the speakers. 

This session addressed banking sector reforms and the opportunities and challenges within Bangladesh's financial markets.

Charles Robertson, author of "The Time Travelling Economist," joined the conference virtually.