In order to control the rise in inflation, the monetary policy of the current financial year will also adopt the policy of reducing the flow of money in the market. That is, the monetary policy will be contractionary. However, no decision has been taken yet on whether the central bank’s policy interest rate will increase or not. The central bank is not in favor of increasing the policy rate or policy interest rate. However, the market may indicate a slight increase in interest rates on loans to unproductive sectors.

The Monetary Policy Department has already held several meetings with the officials of various departments of the Central Bank regarding the formulation of the monetary policy in advance of the current financial year. Officials have given such advice on monetary policy in those meetings. In the light of this, the central bank initially created such a framework of monetary policy. In this regard, the central bank will discuss with renowned economists, research institutes and businessmen of the country today. Senior officials including the Governor of the Central Bank will be present. Based on their feedback, it will be finalized within the next week. The monetary policy draft is likely to be presented at the central bank’s board meeting on July 16. Monetary policy will be finalized based on the opinion of the board. July 18 is the initial day of monetary policy announcement. However, this may change, the central bank said. In that case monetary policy will be announced in the fourth week.

Contractionary monetary policy has been followed for two consecutive years to control inflation. Interest rates have been increased. Its price has been raised in hopes of increasing the flow of dollars. The flow of dollars did not increase. As a result, inflation did not decrease. Inflation also increased due to the effect of increasing interest rates and dollar value.

Inflation has been targeted to be reduced to 6.5 percent in the current financial year. Currently there are 9.72 percent. Economists believe that it is impossible to bring this rate down to the target. However, the central bank will formulate monetary policy keeping that target in mind.

Meanwhile, the IMF has recommended changes to the policy interest rate framework. Currently repo or treasury bill repurchase agreement is the policy interest rate. This rate has been increased from 4 percent to 8 and a half percent. The IMF has asked the bank rate to be declared as the policy interest rate. But currently the bank rate is not very effective. Instead, the repo rate is more active. Currently the bank rate is 4 percent. This rate was reduced during Corona. It was not extended after that. Even if the interest rate has increased, the bank rate has not increased.

Meanwhile, in the next monetary policy, as imports in unproductive sectors or luxury sectors will be more controlled, the interest rates of loans in these sectors will also be slightly increased. As a result, the flow of money in these sectors will decrease and inflation will decrease. The government will no longer be given new loans by printing money from the central bank. At the same time, the central bank’s funds in printed money will be reduced in size as well as the supply of credit. However, the supply of credit to the manufacturing sector will be increased.

At the beginning of today’s meeting, the central bank will present a report on the overall economic situation of the country. Then talk about the context of monetary policy. Based on this, the opinion of economists and businessmen will be sought.

Meanwhile, most of the monetary policy targets of the outgoing fiscal year were not achieved. In light of this, the target may be revised. Inflation did not come down despite reducing money flow more than the target. As a result, economists have raised the question of how much it will be possible to control inflation based on the flow of money.