Economic Analysis - BB Unlikely To Hike In H1FY2018/19 - APR 2018

BMI View: Bangladesh Bank held its policy rates unchanged for H2FY2017/18 (January-June) at its policy meeting on January 29. We expect the central bank to keep policy rates on hold at its July meeting as it continues to adopt selective tightening measures to support growth and manage inflationary pressures.

In line with our expectations, Bangladesh Bank (BB) maintained its accommodative monetary policy stance, holding its benchmark repurchase (repo) and reverse repo rates unchanged at 6.75% and 4.75%, respectively, at its semi-annual policy meeting on January 29 ( see "No Easing Through FY2017/18, July 27 2017). The central bank cited that current rates were still appropriate to balance its growth and inflation goals based on its upwardly revised 12-month average inflation threshold of 6.0% (from 5.5% previously). We believe that the central bank will continue to keep its policy rates on hold for H1FY2018/19 (July-December) at its July meeting and instead continue adopting selective tightening measures to manage growing domestic inflation, albeit risks are tilted to the upside.

Inflationary Pressures To Rise

Credit Growth Exceeding Projections
Bangladesh - Private Sector Credit Growth, % chg y-o-y
BMI, Bangladesh Bank

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