<div><span style="font-size: 1rem;"><b>Bangladesh Bank (BB) on Sunday announced a tight monetary policy statement (MPS) for July-December of FY24, lifting the interest rate cap and giving priority to taming inflation and stabilising the exchange rate.</b></span><br></div><div><br></div><div>Governor Abdur Rouf Talukder announced the new monetary policy in a press conference at Jahangir Alam Conference Hall, at 3pm. Chief Economist Dr Md Habibur Rahman gave a presentation on the new MPS highlighting the different measures relevant to the macroeconomy.</div><div><br></div><div>The governor said, “The BB adopted a contractionary monetary policy to bring down the rate of inflation to a desired level, while remaining supportive to investment and employing generating.”</div><div><br></div><div>The central bank has finally removed the lending interest rate cap along with increasing the policy rate (repo rate) by 0.5 percent from July this year from the present 6 percent, in order to control money flow and reduce consumptions, said the BB governor.</div><div><br></div><div>Though it is a contractionary monetary policy, the central bank will ensure money flow for agriculture and rural credit to ensure food production and employment, Rouf said.</div><div><br></div><div>These measures are usually adopted to control inflation to bring macroeconomic stability and cut demand.The interest rate cap of 6 percent on deposits and 9 percent on lending(deposit-lending) ended, replacing it with a market-driven smart reference rate, which will be regulated by the average treasury bills rate.</div><div><br></div><div>As per the smart rate formula, adopted in the monetary policy, the reference rate will be calculated as the six-month moving average rate of treasury bills with a 3 percent margin for banks and a 5 percent margin for non-bank financial institutions.</div><div><br></div><div>Currently, the rate of the 6-month treasury bills stands at 7.10 percent, so the maximum lending rate for bank loans will be 10 percent plus, and for NBFIs 12 percent plus.</div><div><br></div><div>Governor Abdur Rouf said the monetary policy focused on interest rates in order to control the growing inflation, which was created by external effects.</div><div><br></div><div>In reply to a query, he said a stable exchange rate and standard foreign exchange reserves are the challenges of this monetary policy.</div><div><br></div><div>The MPS has projected private sector credit growth of 11 percent in FY24 from 14 percent in FY23, and public sector credit growth to 30 percent from 37.7 percent.</div><div><br></div><div>Deputy Governors, executive directors, and different department heads were also present at the press conference. ‍Source: UNB</div><div><br></div><div>bnbd24/fas</div>