FE Report (January 25, 2011)
The central bank is yet to decide for removal of restriction on lending rates to tame the inflation rate within a tolerable limit, an executive director of the Bangladesh Bank (BB) said Monday.
"We're not yet thinking about the withdrawal of the cap on lending rate right now because of the rising trend about inflation," the BB executive told the FE, adding that the cap would be lifted after considering the country's overall economic situation.
The country's official inflation rate, Consumers' Price Index (CPI), as measured by Bangladesh Bureau of Statistics (BBS), moved up in the month of November last mainly because of increase in prices of food items.
The inflation rate moved up to 8.14 per cent in November from 8.12 per cent of the previous month on an average annual basis.
On the other hand, the point-to-point inflation rate rose to 7.54 per cent in November from 6.86 per cent in October 2010, despite the declining prices of non-food items, the BBS figures showed.
The BB executive also said the overall prices level will go up further if the central bank withdraws such restrictions on the lending rate.
On April 19, 2009 the central bank asked the commercial banks to fix the ceiling on lending rate in five specific areas at 13 per cent to help mitigate the impact of the on-going global economic meltdown.
The five areas for which a ceiling on lending rate has been fixed are: agriculture, term loan to large and medium-scale industries, working capital to large and medium-scale industries, housing, and trade financing.
Another central banker has ruled out the impact of increased cash reserve requirement (CRR) in the money market, saying that it has injected more funds through repurchase agreement (Repo) auction than it has withdrawn.
The commercial banks deposited Tk 19.70 billion with the central bank to maintain the new CRR rules, which came into effect from December 15 last, he added.
He said that there was no overall liquidity problem in the banking sector as a whole the excess liquidity with commercial banks is now at about Tk 210 billion, he added.
"We're providing liquidity support continuously to the banks through repurchase agreement (Repo) auction to stabilise the money market," he said.
As part of the move, the central bank funnelled Tk 34.7909 billion through Repo auction Monday to the banks while primary dealers (PDs) received over Tk 38.85 billion as special liquidity support, according to the auction result.
The central bank had earlier selected 15 PDs -- 12 banks and three non-banking financial institutions (NBFIs) -- to handle government securities in the secondary market.
The central bank is yet to decide for removal of restriction on lending rates to tame the inflation rate within a tolerable limit, an executive director of the Bangladesh Bank (BB) said Monday.
"We're not yet thinking about the withdrawal of the cap on lending rate right now because of the rising trend about inflation," the BB executive told the FE, adding that the cap would be lifted after considering the country's overall economic situation.
The country's official inflation rate, Consumers' Price Index (CPI), as measured by Bangladesh Bureau of Statistics (BBS), moved up in the month of November last mainly because of increase in prices of food items.
The inflation rate moved up to 8.14 per cent in November from 8.12 per cent of the previous month on an average annual basis.
On the other hand, the point-to-point inflation rate rose to 7.54 per cent in November from 6.86 per cent in October 2010, despite the declining prices of non-food items, the BBS figures showed.
The BB executive also said the overall prices level will go up further if the central bank withdraws such restrictions on the lending rate.
On April 19, 2009 the central bank asked the commercial banks to fix the ceiling on lending rate in five specific areas at 13 per cent to help mitigate the impact of the on-going global economic meltdown.
The five areas for which a ceiling on lending rate has been fixed are: agriculture, term loan to large and medium-scale industries, working capital to large and medium-scale industries, housing, and trade financing.
Another central banker has ruled out the impact of increased cash reserve requirement (CRR) in the money market, saying that it has injected more funds through repurchase agreement (Repo) auction than it has withdrawn.
The commercial banks deposited Tk 19.70 billion with the central bank to maintain the new CRR rules, which came into effect from December 15 last, he added.
He said that there was no overall liquidity problem in the banking sector as a whole the excess liquidity with commercial banks is now at about Tk 210 billion, he added.
"We're providing liquidity support continuously to the banks through repurchase agreement (Repo) auction to stabilise the money market," he said.
As part of the move, the central bank funnelled Tk 34.7909 billion through Repo auction Monday to the banks while primary dealers (PDs) received over Tk 38.85 billion as special liquidity support, according to the auction result.
The central bank had earlier selected 15 PDs -- 12 banks and three non-banking financial institutions (NBFIs) -- to handle government securities in the secondary market.
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