A high-powered panel of the Bangladesh Bank (BB) decided to maintain the policy rate at 10 percent until the inflation comes down to a desired level and also spoke about moving away from the crawling peg and letting market forces determine the US dollar exchange rate.

However, the meeting did not finalise anything about ditching the crawling peg right now, according to the meeting minutes of the Monetary Policy Committee (MPC).

Chaired by central bank Governor Ahsan H Mansur, the meeting was held recently.

On May 8 this year, the BB introduced the crawling peg, allowing banks to buy and sell US dollars freely at around the mid-rate of Tk 117.

At that time, it was said that the step would serve as a transitional arrangement, paving the way toward a fully flexible exchange-rate schedule in the future while slowing the erosion of the country's dollar reserves.

After the formation of the interim government in early August, the mid-rate of the crawling peg moved forward slightly, with the inter-bank exchange rate now standing at Tk 120 per dollar.

However, the foreign exchange market, which had been highly volatile for more than two years, started to stabilise in recent months.

Industry insiders credited growing export earnings, higher remittance inflows and a fall in imports as factors behind the recent stability.

Apart from continuing the policy rate at 10 percent, it was decided at the meeting to maintain the standing deposit facility and standing lending facility at 8.5 percent and 11.5 percent respectively.

The central bank's board of directors approved the resolution.

The MPC said the current monetary policy stance is on the right track and there is no immediate need to raise the policy rate further.

The committee anticipated that inflation would likely decrease due to the downward trend in the global price outlook, moderation in geopolitical tensions, stability in the exchange rate, a good harvest of Aman season rice paddy and an increasing supply of winter vegetables.

The MPC also recommended the BB remain focused on credit disbursement to productive sectors, especially agriculture and cottage, micro, small, and medium enterprises (CMSME) for enhancing the supply of essential goods and services.

Moving forward, independent members of the MPC asked the central bank to look into the bank deposit slowdown despite substantial increases in the deposit rates and the exchange rate stability.

Members emphasised the importance of coordination of monetary policy with fiscal policy and stronger Bangladesh Bank of state-owned banks, many of which are in dire financial straits.

The MPC assessed the current macroeconomic situation, challenges, and outlook from domestic and global perspectives.

Moreover, the MPC focused on reviewing the current inflation trend and outlook, economic activities and growth prospects, recent financial market developments, and developments in the external sector.

The MPC also reviewed the overall banking liquidity situation, particularly the cashflow shortage of some conventional as well as Islamic banks, interest rate trends, the foreign exchange reserve position, and exchange rate developments.

Additionally, the committee was informed about the mechanism of ongoing liquidity support in the banking system by the BB and its sterilisation process through open market operations.