This document is a presentation on monetary policy in Bangladesh by Group 16. It begins with introductions of the group members. The presentation covers topics such as the definition of monetary policy, the tools and transmission mechanisms of monetary policy, impacts of monetary policy on inflation and capital markets, Bangladesh Bank's monetary policy stances and challenges to monetary policy in Bangladesh. The presentation provides an overview of key concepts in monetary policy as well as analysis of monetary policies implemented in Bangladesh.

1. Welcome to our Presentation

2. We are… Group No: 16
Name Id No:
Gourav Roy 20-059
Al-Amin Khandakar 20-019
Pantho Sarker 20-033
Shahriar Md. Lukman 20-047
Mohammed Gulam Kibria 20-075
Group Figures

3. We are Presenting on…
Monetary Policy in Bangladesh

4. Now you are with…
Gourav Roy
Id No: 20-059

5. Impacts on capital Market
Impacts of
Monetary Policy
on Inflation
Justification of
the Monetary
Policies
Recent Monetary
Policies by
Bangladesh Bank
The Bangladesh
Experience of
Monetary Policy
A Justified and
Brief
Recommendation
Challenges to
Establish a sound
Monetary Policy
The
End
Topics to be Covered…
An Overview of
Monetary
Policy

6. What is Monetary Policy?
Ensuring the Growth
and Stability of
Money Supply
Monetary Policy
is a Process
Dealing with
Maintaining the
Optimum Cost of
Money
The Supply
of Money
The Availability of
Money
Developing Policies
for Smoothing the
Business Trends

7. History of Monetary Policy by Timeline
Chart to show the Dealings of Monetary Policy with Times
Early Period
Organization of Paper
Money
Organization of
Central Bank
Industrialization
Period
“Jiaoji” originated in China at
First as paper money
In 1870-1920, economy grew more critical
and monetary policies became more
expanded
Stage 1 Stage 2 Stage 3 Stage 4
T
I
M
E
L
I
N
E
a) Decisions about
coinage system
b) Decisions about
money
In 5000 B.C.
The Bank of England in
1964 started officially the
normal monetary policy
Present
Stage
Stage 5

8. Types of Monetary Policy
Expansionary
Policy
Used to reach a targeted price level
Appropriate when, Inflation is imbalanced
Appropriate when, Economy and Inflation
Appropriate when, Recession and Unemployment
Types of Monetary
policy
Contractionary
Policy
Inflation Targeting
Price level
Targeting
Monetary
Aggregates
Gold standard
Fixed
Exchange Rate
This approach focuses on monetary quantities
which influence Central Bank’s reaction function
It’s a special type where the value of national currency is measured
on the basis of the reserved gold by a country.
The policy is based on maintaining a fixed exchange rate
with foreign currency.

9. Scopes of Monetary policy
Short term interest
rates
Long term
interest rates
Velocity of
money through
the economy
Exchange
rates
Bonds
and
Equities
Govt.
Spending
Financial
Derivatives
International
Capital flows
Scopes
of MP

10. Equilibrium in the Money Market
Quantity of
Money
Interest
Rate
0
Money
demand
Quantity fixed
by the Bangladesh Bank
Money
supply
r2
M2
d
M d
r1
Equilibrium
interest
rate
Copyright © 2004 South-Western
E

11. The Tools of Monetary Policy (MP)
Interest rate
controls
Credit
controls
Lending
to domestic
Banks
Reserve
requirements
Secondary
reserve
requirement
Cash
reserve
requirement
Securities
requirement
Direct
Policy
Tools
Indirect
Policy
Tools
Tools
of
MP
Open
market
operations

12. Now you are with…
SHAHRIAR MD. LUKMAN
ID; 20-047

13. Transmission Mechanism of Monetary Policy
• The process through which monetary policy decisions affect the economy in general and the
price level in particular.
Transmission Mechanism
Change in
Official Interest
Rates
Affects Banks
and Money
Market Interest
Rates
Affects
Expectations
Affects Asset
Prices
Affects Saving
and Investment
Decisions
Affects the
Supply of Credit
Leads to Changes
in Aggregate
Demand and
Prices
Affects the
Supply of Bank
Loans
Process of
Transmission
Mechanism
Non
Controlled
Elements
• Changes in Risk Premium
• Changes in Bank Capital
• Changes in Global Economy
• Changes in Fiscal Policy
• Changes in Commodity Prices

14. Transmission Mechanism of Monetary Policy
Fig: Transmission Mechanism of Monetary Policy

15. Repurchasing
Securities worth
of TK 100
Million by
Bangladesh
Bank
Expansionary
Monetary
Policy
Fall in The
Commercial
Bank’s Cash
Rate
Peoples’
Borrowing and
Spending
Increases
Aggregate
Demand Rises
GDP Rises
Price Level
Rises
Transmission Mechanism of Monetary Policy: Hypothetical Example

16. • Purchases Securities in the Open
Market;
• Lowers the Central Bank’s Discount
Rate;
• Lowers Reserve Requirements;
Expansionary
Monetary
Policy
• Sells Securities in the Open Market;
• Raises the Central Bank’s Discount
Rate;
• Raise Reserve Requirements;
Contractionary
Monetary
Policy
Impacts of Monetary Policy on Capital Markets
Interest
Rate
Rises
Interest
Rate
Decreases
Increase in Bond Prices;
Higher Levels of Capital
Investment;
Demand for Domestic Bonds Falls;
Decrease in Bond Prices;
Lower Levels of Capital
Investment;
Make Domestic Bonds More
Attractive;

17. Now you are with…
Md. Gulam kibria
ID: 20-075

18. Impact of Monetary Policy on Inflation
• Purchases Securities in the Open Market;
• Lowers the Central Bank’s Discount Rate;
• Lowers Reserve Requirements;
• Lowers Statutory Liquidity Requirements
Expansionary
Monetary
Policy
• Sells Securities in the Open Market;
• Raises the Central Bank’s Discount Rate;
• Raises Reserve Requirements;
• Raises Statutory Liquidity Requirements
Contractionary
Monetary
Policy
Increase
Money
Supply
Decrease
Money
Supply
Increase
consumer’s
Money to Spend
Deccrease
consumer’s
Money to Spend
Increase
Inflation
Rate
Decrease
Inflation
Rate

19. Frameworks of Bangladesh’s Monetary Policy
Developments/Information
 GDP growth & Inflation
 Growth of monetary aggregates
 Liquidity Situation
 Short-term Interest Rates
 Foreign Reserves & Exchange Rates
Policy Decision
Based on market
information and
judgment of the policy
makers
Instruments
 Open market
operations (Repo,
Reverse Repo and
BB bill auctions)
 Variation in reserve
ratios
Targets
1. Operating Target
 Reserve Money
2. Intermediate Target
 Broad Monet
 Interest Rate
Goals
Moderate Inflation
Sustainable Growth

20. Now you are with…
Al-amin khandakar
Id No: 20-019

21. Monetary policy Analysis in Bangladesh
(Internal sector):
2012 (July) 2013 (January) 2013(July) 2014(January)
7.50% 7.50%
7.00% 7.00%
Average Inflation
2012 (July) 2013 (January) 2013(July) 2014(January)
16.50%
17.70%
17.20%
17.00%
Broad Money Growth
2012 (July) 2013 (January) 2013(July) 2014(January)
13.80%
16.10%
15.50%
16.20%
Reserve Money Growth
2012 (July) 2013 (January) 2013(July) 2014(January)
7.75%
7.25% 7.25% 7.25%
Repo Rate

22. Monetary policy Analysis in Bangladesh
(External Sector):
FY 11 FY12 FY 13 FY 14
41.50%
6%
11.20%
16.56%
Export Growth Rate
FY 11 FY12 FY 13 FY 14
52.10%
2.50% 0.80% 4.40%
Import Growth Rate (Shipment)
FY 11 FY12 FY 13 FY 14
6.00%
10.20%
12.60%
-8.40%
Remittance Growth Rate
FY 11 FY12 FY 13 FY 14
74.20%
81.80%
77.80%
81.40%
Exchange Rate (Tk./USD)

23. Challenges of Establishing Balanced Monetary
Policy in Bangladesh:
Challenges of
Monetary Policy
Non-
Monetized
Sector
Non-
Banking
Financial
Institution
Unorganize
d Financial
Market
Higher
Liquidity
Black
Money
Lack of
Honesty
Lack of
Integrated
Interest
Rate
Structure
Time Lag

24. Now you are with…
Pantho Sarker
ID: 20-033

25. Bangladesh Bank’s Monetary Policy Stance (For the first half of the FY 2016)
BB’s aim is to achieve maximum economic growth with boosting investment
using selective easing strategy and ensuring moderate inflation.
The success of monetary policy depends on the
skillful interaction of these variables by Bangladesh
Bank.

26. Bangladesh Bank’s Monetary Policy Stance (For the first half of the FY 2016)
Macro Variables Projected figure (For
FY 2016)
GDP Growth
7%
CPI Inflation 6.2%
 Urgent redressing of infrastructural and
administrative deficiencies
 Preserving political calm and stability
Current Inflation
rate is 6.40%

27. Bangladesh Bank’s Monetary Policy Stance (For the first half of the FY 2016)
Money Supply
 BB has projected to increase the
broad money (M2) at 15.6% rate
Reserve
Money
 BB has projected to increase
reserve money at 15% rate
Policy Interest
Rate (Repo,
Reserve Repo)
 Remain unchanged, but easing will be considered after
point-to-point headline general inflation and core CPI
inflation take a sustained declining trend.

28. Bangladesh Bank’s Monetary Policy Stance (For the first half of the FY 2016)
 This is a growth supportive monetary policy that promotes investments through the strategy
of selective easing.
 Commercial banks have been motivated and supported in extending loans to the productive
and vulnerable sectors at lower interest rates.
 Green projects and export promotion activities will also avail loan at a lower rate
 BB’s policy is to reduce the fluctuation in the exchange rate as much as possible.
Use of Selective Easing Method
Exchange Rate

29. Thank You for Being with
us