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MONETARY POLICY OF BANGLADESH

Background of the study: Monetary policy in Bangladesh Monetary policy is the term used by the economists to describe ways of meaning the supply of money in economy. It is the process by which taken by the central bank to control money supply of economy. The angulation of the money supply and interest rates by Bangladesh bank in order to control inflation and stabilize currency. All most all modern nations in the world follow this policy to control there money supply.

Objective of the study:1. To give a theoretical overview of Monetary policy in general2. To know about monetary policy in Bangladesh3. To explore the monetary policy tools those are used in

Bangladesh.

Importance of the study:The monetary policy has a great importance on economy. Such as-

i. To control supply of money.ii. To setup rate of interest.iii.To promote economic growth and stability.iv.To stabilize price and low unemployment.v. To control inflation and deflation.

Objective of monetary policy in Bangladesh1.To regulate currency and deserves 2.To manage the monetary and credit system.3.To preserve the par value of domestic currency.4.To promote and maintain a high level of production,

employment and real income.5.To foster growth and development of the countries resources

in the best national interest.

Tools of Monetary policy:Major instruments of monetary control available with Bangladesh bank are the bank rate, open market operations, rediscount policy and statutory reserve requirement.The methods of credit control-

1.Bank rate policy.2.Open market policy etc.3.Variation of reserve ratio.4.Direct action .5.Publicity.

Literature review: monetary policy of Bangladesh The lending rate of banks, which had come down to single digit or low 2 digits, is rather high now, nearing 16-20 per cent depending on nature of loans.

Although Bangladesh Bank (BB) has been pursuing a contractionary monetary policy, the government of Bangladesh has been pursuing an expansionary fiscal policy, mainly on account of safety nets and subsidies

In the coming days, it is expected that the import payments towards meeting the energy needs of the country will be high.

Industrialization in Bangladesh is still in its infancy. Worldwide governments are helping local producers by offering them tax breaks, cash incentive, subsidy etc.

Bangladesh Bank should coordinate with the government on policy matters.

The Bangladesh Bank governor keeps stressing the need to reduce credit flow towards non-productive sectors.

Bangladesh Bank and the Government of Bangladesh should setup a prudential strategy to encourage more foreign currency inflow

Recommendation: In Bangladesh, capital markets should be expanded and

organized enough to succeed the monetary policy. The credit control mechanisms like open market operation,

bank rate, etc. should be effective. A narrow bill market should make the discount rate

effective. To run the monetary policy smoothly and effectively, it is

essential to pay sufficient attentions to increase the GDP

ConclusionIn view of formulating credible monetary policy to attain the achievement of economic objective, the difficult part for the central banks is to distinguish, within ongoing inflation evolutions, between short term volatility and the underlying pressure of inflation,

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