Dr Zahid Hussain

Bank

Checking inflation with contractionary policy a tough job

Currently, the country's economy is experiencing high inflation, posing several challenges in macroeconomic terms. Among these challenges, high inflation stands out as the most significant. To address this inflationary pressure, various initiatives have been undertaken, with notable emphasis on monetary policy. However, the recent announcement of monetary policy by the Bangladesh Bank appears to be conservative in nature. The Bangladesh Bank believes that a conservative monetary policy will play a supportive role in controlling high inflation. However, this initiative has been delayed. Furthermore, it is uncertain to what extent conservatism will be sufficient in controlling high inflation because inflation is not solely caused by one factor. There are many other factors contributing to inflation. Therefore, controlling high inflation through conservative monetary policy alone will be challenging.