Monetary policy aims and methods have changed over time. Both in developed
andd ev elo p in g
ec onomies
, monetary
poli cies seek
to ma inta in
price st ab il ity
by sustained stable output growth in the face of internal and external shocks that are faced from time to time.
In dev e lop e d economies wi th pr od uc ti on fa ctors
at or cl os e to full employm e nt, monetary
policies are formulated typically with the output gap (difference between the actual and the longer run potential output)
in view; the policy stance is eased to pr ov i d e st im u l us at ti m e s of slowd o w n when act u a l out p u t lags th e lo n g er ru n
p o t e n t ial, an d th e sta n c e is ti g h t e n e d to
slow thi n gs dow n when
the e c onomy
overheats with actual output running ahead of the sustainable longer run potential. Diagnosing and treating asset price bubbles
symptomatic of overheating are major issues of current debate in monetary policy.
For deve loping ec onomi e s li ke Banglades
h wit h s i gnifica n t un dere m p loym e n t/u nder exploitation of production factors, stimulating higher growth is imperative for rapid reduction
and eventual elimination
of endemic poverty, and is therefore an overriding priority. The
stimulus provided by monetary policies in
accommodatingt h e gr owth
as pi ra t i ons must
not howe v e r ov e r
step to w a rd s ma cr oeconom i c imbalance destabilizing and jeopardizing future growth; and the pursuit of monetary policies comprise the continual balancing act of supporting the highest sustainable outp ut growth wh i l e adj u sting smoot hl y to internal and ex t e r n al shock s th a t the economy encounter from time to time.
Th e pri m a r y
object ive of
th e
Mon e tary
Po l i cy of
Bangl a desh
is to
ou t l in e
t h e formulation and implementation of monetary policy of the Bangladesh Bank (BB), and to convey its assessment of the recent and the expected
monetary and inflation developments to the stakeholders and the public at large
The Bang l a des h Bank Or de r of 197 2 outli n es the ma i n object ives of monetary policy in Bangladesh, which comprises—
■ To achieve the price stability
■ To regulate currency and reserves
■ To promote and maintain a high level of production,
employment and real income, and economic
gr o w th , si n c e inde p e ndence BB opera t e d under a variety of pegged exchange rate systems amid capital controls
■ To manage the monetary and credit system
■ To maintain the par value of domestic currency
■ To promote growth and development of the country's productive resources in the best national interest
■ Altho u gh the lo n g
te r m fo c u s
of monetary poli c y in Ba ng la de sh is
ongrowt h wit h sta b ili t y,
th e
sho r t ‐ term
objec t i v es
ar e
de ter m ine d