Who formulates 'Monetary Policy' in Bangladesh and how many times in a year?

MCQ Question: Who formulates 'Monetary Policy' in Bangladesh and how many times in a year?

Choices:

• Bangladesh Bank, twice a year

• Bangladesh Bank, once a year

• Ministry of Finance, twice a year

• Ministry of Finance, once a year

Correct Answer: Bangladesh Bank, twice a year

Explanation:

The monetary policy of a country involves the management of the money supply and interest rates by its central bank to control inflation, consumption, growth, and liquidity. For Bangladesh, this significant responsibility is entrusted to the Bangladesh Bank, the central bank of the country.

The Bangladesh Bank formulates the monetary policy primarily to achieve several key objectives, including:

• Price stability

• Full employment

• Economic growth

• Stabilization of financial markets:

According to the Bangladesh Bank Order, 1972, and its amendment in financial regulations, the institution is mandated to review and create monetary policy twice a year. Below are the two main timeframes:

1. January: This policy generally outlines the financial expectations and monetary strategy at the beginning of the calendar year.

2. July: This mid-year review helps in assessing the outcomes of the policies implemented in January and making adjustments if necessary.

This biannual formulation helps the central bank to fine-tune the monetary policy tools, like interest rates and reserve requirements, to meet changing economic conditions. By doing so, Bangladesh Bank can effectively steer the economic framework towards its goals.

Rejecting Other Choices:

To further elucidate why the correct answer is "Bangladesh Bank, twice a year," let's consider the other choices and why they are incorrect:

1. Bangladesh Bank, once a year: While Bangladesh Bank is correct, the policy formulation happens twice a year, not just once.

2. Ministry of Finance, twice a year: The ministry handles fiscal policies, not monetary policies. Monetary policy is strictly the domain of Bangladesh Bank.

3. Ministry of Finance, once a year: Again, the Ministry of Finance deals with fiscal matters, and thus, does not formulate monetary policy.

References:

• Bangladesh Bank Official Website

• Monetary Policy Activities of Bangladesh Bank

In summary, the correct answer is indeed "Bangladesh Bank, twice a year" because it aligns with the central bank's mandate and the biannual frequency of its monetary policy reviews as stated in official documents.