To ensure a modern monetary policy for a country like Bangladesh that is undergoing rapid structural changes, both foreign exchange and interest rate flexibility are necessary ingredients for all market development, says former Bangladesh Bank (BB) governor and economist Atiur Rahman.
He made the remarks while presenting the keynote address of the first "MAM Kazemi Memorial Lecture on Monetary Policy" on Sunday night.
The event was organized by the Bangladesh Institute of Bank Management (BIBM).
"I commend the current [BB] governor for emphasising foreign exchange flexibility, which should make it easier for the incoming governor to move in that direction," he added.
Stating that there is a need for a trade-off between developmental central banking and financial and economic stability, Atiur said, "We need to take more money out of the traditional fields of investment and put it to work at a grass-roots level.
"I think that is what central banks should do."
"Continue traditional monetary policy as close to market imperatives and at the same time investing in the real economy to augment more supplies of goods and services. Let's not jump. Let's not be adventurous.
"Let's touch the ground and remain focused on what has If need be, we should also be ready to change our course in the middle of the journey depending on the level of the crisis," the former BB governor furthered.
He said, "However, collaboration and partnership between stakeholders should remain our key strategy. This has worked. well in the past. This will work better as well in the future."
Speaking at the event as the chief guest, Fazle Kabir, BIBM governing board chairman and the current BB governor, said, "Kazemi formulated a new monetary policy for Bangladesh after independence.
"He emphasised sustainable growth, stable inflation, just exchange rates and foreign trade balance.
Mentioning that the interest rate is not the only tool to implement a monetary policy, BB Deputy Governor Abu Farah Md Nasser said, "Some experts asked me to open interest rates. Earlier when the rate was high, bankers came together to control it.
"BB had to intervene as they failed to do so. Inflation and credit growth among other tools are our consent for monetary policy implementation."
BIBM Director General Md Akhtaruzzaman, former Mutual Trust Bank (MTB) managing director Anis A Khan aloNg with current and former supernumerary professors and officials including senior BB officers, senior bankers and chair professors of BIBM attended yesterday's (26 June) programme.