Bangladesh Bank is not going to bring any change in its monetary policy right now though inflation rate was shown around 3 percentage points less as per the new base year over the old one.

BB Governor Atiur Rahman said they will continue the existing monetary policy stance till December and will go by the inflation rate of the old base year till then.

The government last month introduced a more representative index of wholesale prices and brought forward the base year -- to 2005-2006 from 1995-1996 -- for calculating inflation in the changing structure of the economy.

The government will continue releasing two types of inflation data till December, on the basis of both the new and old base years.

The central bank governor said they will compare the two inflation rates in January, and if necessary, they will then bring changes in the monetary policy.

In line with the new base year, inflation on a point-to-point basis stood at only 5.21 percent in July, while the rate was 8.03 percent according to the old base year.

The central bank in July announced the monetary policy for the first six months of the current fiscal year and adopted a tight stance to contain inflation.

Inflation had been in double digits since March last year before starting to fall in April this year. The rate went down by 0.53 percentage point in July as per the old base year.

As inflation, especially that of non-food, had been soaring, the central bank in its monetary policy in January adopted a tightening stance to rein in credit growth.

The BB also asked the government to reduce its dependence on banks' money, and took some steps to hold back the depreciation of the dollar.

Finance Minister AMA Muhith yesterday at a programme told journalists that the falling trend in inflation was due to the central bank's monetary policy stance.

Muhith said the government has also followed a tightening approach in its fiscal policy from the beginning of the current fiscal year to minimise its wasteful expenditure.

He admitted the government was relaxed about its expenditure in the first six months of the last fiscal year.

The BB governor said, besides the tight monetary policy, the appreciation of the dollar also caused a fall in inflation.

He said a decline in the prices of imported products also contributed to the ease in inflation.

The BB will always remain active to bring down inflation, the governor said.

The Daily Star/Bangladesh/  7th Aug 2012

A Rouf Chowdhury, chairman of Bank Asia, poses with participants of a two-day workshop on credit appraisal system and green banking, at its concluding ceremony at the Bank 's corporate office in Dhaka on Sunday. Md Mehmood Husain, managing director, was also present.

The Daily Star/Bangladesh/  7th Aug 2012

Members of Yunus Shurid (Friends of Yunus) at a meeting in Chittagong yesterday expressed deep concern over the recent proposed change in the legal structure of Grameen Bank.

Professor Muhammad Sekandar Khan, vice chancellor of East Delta University and also the convener of Nobel Laureate Dr Yunus Shurid (Friends) Chattagram, presided over the meeting.

The bank was formed for the poor and it helped to reduce poverty in the country for long, speakers said, adding that with the government's recent interference this process of poverty reduction will be greatly hampered.

One of the speakers said such government initiative may result in the bank losing its main characteristic of serving poor and 97 percent ownership by poor women shareholders. The bank may ultimately turn and work like other state-owned banks of the country, he said.

The meeting urged the government to change its decision and restore the bank to its original form.

The Daily Star/Bangladesh/  7th Aug 2012

Enhancement of cash flow along with institutional investors’ continuous and active participation is a must to bring stability in the country’s share market, said Akter Hossain Sannamat, a market analyst.

While talking to daily sun the managing director of Union Capital recommended reducing cash reserve requirement (CRR) and statutory liquidity requirement (SLR) for increasing fund flow to the market.

“Bangladesh Bank can reduce CRR and SLR to increase fund flow into market,” he said, although some experts fear that it will create more inflation.

Akter H. Sannamat suggested 0.50 per cent reduction in CRR taking it as a test case.

If it casts negative impact on the economy, CRR could be enhanced again through reverse REPO, he opined.

The analyst argued that cash flow will not worsen the inflation situation if it is cost-push.

The cost-push inflation is experienced when there are substantial increases in the costs of important goods or services where no suitable alternative is available.

He said Bangladesh is facing cost-push inflation, so will not be hit by cash flow in the market.

“The inflation will be worsened if it is demand-pull, but ours is the cost-push inflation,” Akter H Sannamat explained.

The demand pull inflation means substantial increases in the prices of goods and services resulting from high demand, but insufficient supplies, stimulated by easy credit and higher purchase offers.

In general, more inflation is caused by demand-pull factors than by cost-push ones.

Sannamat urged the government to cut import duty and supplementary tax to ease cost push inflation.

If CRR and SLR are reduced, it will swell funds flow in the money market, and then money market will be soft, he said.

“The soft money market will cut lending rate and eventually decrease production cost.”

He clarified that when production costs decline, inflation will come down.

Akter Sannamat also said decrease of CRR and SLR will not increase money supply excessively, as the banks and financial institutions are still in short of fund.

But it would help to meet the demand of banks and non-banking financial institutions of reducing CRR and SLR conditions.

The country’s twin bourses were bullish in 2010, which was said because of aggressive investment of the commercial banks.

The turnover value also mounted to Tk 32.49 billion at that time.

Although a commercial bank can invest 10 per cent of its liabilities in the stock market according to BB rules, most of the banks, in 2010, exceeded this limit.

Even the investments of some banks reached up to 30 per cents of their liabilities.

However, the current investment of the commercial banks, on an average, is 2.25 percent.

In the recent weeks, the market experiencing downtrends reportedly due to fund shortage.

The Daily Sun/Bangladesh/ 5th Aug 2012

Muhammed Ali, Managing Director of SIBL, hands over a cheque for Tk 250,000 to Md Samshul Hoque, son of its employee in Dhaka.

Social Islami Bank Limited (SIBL) recently donated Tk 250,000 to one of its employees for heart treatment.

Muhammed Ali, Managing Director of the Bank, handed over the cheque to Md Samshul Hoque, son of the employee, said a press release.

Deputy Managing Directors and other executives of the Bank were present.

The Daily Sun/Bangladesh/ 5th Aug 2012