Inflation to hover around 7pc: BB

Dhaka, Jan 30 (bdnews24.com) – Bangladesh Bank fears that the inflation rate would increase by 0.5 percentage point to 7.0 percent in lieu of budgetary target of 6.5 percent for the current fiscal. "We don't think 12-month average inflation will come down rapidly in the second of the fiscal and it's feared that the rate will be hovering around 7.0 per cent in June 2011," central bank governor  Dr Atiur Rahman said while announcing the 'accommodative' monetary policy statement (MPS) for Jan-June period of the current fiscal. The MPS is, however, upbeat about achieving the 6.7 percent growth target for the current fiscal. About food prices, Atiur said, "Food prices have increased significantly globally due to bad weather and the prices of non-food products also increased due to better-than-expected growth rate in the emerging and developing countries." The governor said the growth of reserve money, broad money and domestic credit are well above  the target fixed at the last MPS, but the target will remain the same for the current MPS. Broad money target for the period is fixed at 15.2 percent, while reserve money at 13.0 percent while domestic credit at 17.9 percent. The broad money increased by 22.2 percent in November, reserve money by 19.4 percent and domestic credit by 24.2 percent. Deputy governor Nazrul Huda who was present on the occasion said the central bank has yet to  take any decision on withdrawing 13 percent cap on lending. "It's a major policy decision and we'll take decision after analysing the impact of withdrawal," he said. He said the central bank advised the banks to bring down advance deposit ratio and discourage consumer financing. The monetary policy statement for Jan-June period will be remained accommodative for productive  economic activities but the central bank is also firmly discouraging diversion and undue expansion of bank credit for wasteful unproductive uses, to stem buildup of inflationary pressures, the MPS said. The momentum of economic activities and weak growth of remittance inflow has reined in the liquidity  glut, leading to some depreciation of Taka against USD, it said. The central bank to face the liquidity tightness has occasionally intervened in the market by way of repo and USD sales. Stability in the domestic markets is important in sustaining the economy on a high growth path, it said. "To avoid instability and jitters, it will be important to have a properly priced capital and real estate  markets." The crashes are more painful the longer the price corrections are delayed as overheated, overpriced  markets typically collapse in crashes, which are hurtful for all, the statement said. The regulatory regime should provide sufficient safeguards against foaming and frothing of stock prices by unscrupulous market players, it hoped. bdnews24.com/ssz/mr/1815h