Inflation drops to 8.5yr low Star Business Report Star Business Report
Inflation dropped to 5.02 per cent in January, the lowest in eight and a half years, on the back of the arrival of winter vegetables that contributed to the consumer price decline, official figures showed yesterday.
This is the third straight month of overall consumer price decline.
In December, inflation, a measure of changes in the prices of a basket of commodities and services, was 5.29 per cent, according to the Bangladesh Bureau of Statistics (BBS).
A decline in the price of non-food items also contributed to the fall in the overall inflation, easing pressure on the wallets of consumers. A large number of the population, especially the poor and low-income groups, still suffer for the high price of coarse rice.
Banks show lacklustre performance in disbursing farm stimulus
A third of it not yet disbursed even though Bangladesh Bank’s deadline is March 31
Banks are still far from meeting the disbursement deadline for farm loans under the associated stimulus package of Tk 5,000 crore as a third of the fund is yet to be given out.
When the package was announced in April last year in the form of a refinance scheme, Bangladesh Bank asked banks to give out the fund by September 30.
But they had repeatedly exhibited a poor performance to this end, forcing the central bank to extend the timeframe twice.
Bangladesh Bank in a tight spot
It may need to continue expansionary monetary policy, which is creating excess liquidity amid lower credit demand
The central bank plans to continue its expansionary monetary policy in the second half of the current fiscal year because of the persistent business slowdown caused by the coronavirus pandemic.
The monetary policy committee of the central bank will sit on January 31 to decide whether the unconventional tools of the policy will be revised, said a number of central bankers with direct knowledge about the matter.
The major targets of the monetary policy for 2020-21 will not change to a large extent given the economic hardship, they said.
BB in a quagmire as excess liquidity balloons
Funds soar 95pc year-on-year to Tk 204,700cr in Dec last year
Bangladesh Bank has fallen in a quagmire tackling an escalation of excess liquidity trending in banks, emerging from slow credit growth and implementation of stimulus packages and an upward trend in receiving remittance.
Excess liquidity in the banking sector escalated 95 per cent year-on-year to Tk 204,700 crore in December last year, which have largely been invested in treasury bills and bonds, showed data from the central bank.
There is no scope to mop up liquidity from banks at this moment as the excess fund has not had any impact on inflation because of suppressed demand among consumers and investors due to the economic hardship brought on by the coronavirus pandemic.
Pent up demand refers to a situation when demand for a service or product is unusually strong.
Economists generally use the term to describe the general public s return to consumerism following a period of decreased spending.
Spending through credit cards drastically went down in the second quarter of 2020 because of the strict restrictions on movement imposed by the government to keep the deadly coronavirus at bay.
Credit cardholders registered a record amount of transactions to the tune of Tk 1,552 crore in August during Eid-ul-Azha, one of the biggest festivals for Muslims. The figure, however, came down sharply in September.
But the spending started to bounce back heavily since October.