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The Monetary Policy Department (MPD) formulates monetary policy in the form of projected growth path of broad money M2 as an intermediate target, consistent with projections for GDP growth and targeted limit for price inflation over each fiscal year. Reserve money (currency in circulation and balances of banks with the Bangladesh Bank) is used as a main instrument for implementation of monetary policy, in the annual reserve money program formulated by MPD.
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The MPD prepares Monetary Policy Statement - the half-yearly release of Bangladesh Bank’s monetary policy stance that is going to be adopted in next six months. The policy stance has been set based on the assessment of the real sector, external sector, and fiscal and monetary developments in preceding six months and the outlook for near future.
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The MPD arranges the monthly Monetary Policy Committee (MPC) meeting.
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The MPD issues circulars on monetary policy measures related to the department.
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The MPD prepares “The Major Economic Indicators: Monthly Update” for reviewing current economic situations of Bangladesh for the meeting of Board of Directors of Bangladesh Bank.
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The MPD prepares background papers for the auction committee's decisions in the meetings for auction of government treasury bills and treasury bonds. These background papers cover ongoing developments in the overall liquidity situation, government's borrowings from the banking system, various components of broad money, reserve money and macro-economic indicators.
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Since introduction of repurchase agreement (Repo) and reverse repo MPD has been participating as one of the members of the auction committee. It supplies the required statistics/information to the committee in taking decision and issues press release on the auction result on regular basis.
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The MPD prepares statements on liquidity forecasting on daily basis for maintaining the excess reserves as well as targeted path of reserve money. The MPD analyses borrowing of scheduled banks from Bangladesh Bank on monthly basis.
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The MPD works out the nominal and real effective exchange rate indices on continuous basis, with a view to monitoring the external competitiveness of Taka vis-à-vis other major currencies.
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The MPD prepares fortnightly and monthly reviews of the current economic situation covering developments in real and financial sector of the economy.
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The MPD monitors net international reserves (NIR), reserve money, broad money and statement on domestic financing with a view to see if any of that variable deviates from the set target.
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The MPD conducts study on monetary and exchange rate policies and other economic issues. It also provides comments and makes recommendations on various issues like money market, exchange rate, national budget and other international financial affairs.
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