The Bangladesh Bank is the central bank of Bangladesh, responsible for formulating and implementing

monetary policy to achieve macroeconomic stability and economic growth. The bank's primary objective
is to maintain price stability, promote sustainable economic growth, and maintain financial stability.

The monetary policy framework in Bangladesh is based on a combination of monetary targeting and
inflation targeting. The bank sets a monetary target based on the country's projected output growth and
inflation rate. The bank adjusts the monetary policy tools such as the reserve requirement, open market
operations, and the policy interest rate to achieve the target.

One of the critical tools used by the Bangladesh Bank is the policy interest rate, which is the rate at
which the central bank lends money to commercial banks. By adjusting the policy interest rate, the
central bank can influence the borrowing and lending rates in the economy, which, in turn, affects
consumer spending, investment, and inflation.

Monetary policy tools:

 Reserve Requirement: The Bangladesh Bank requires commercial banks to hold a certain
percentage of their deposits in reserve with the central bank. By adjusting the reserve
requirement, the central bank can influence the amount of money that banks have available to
lend, which, in turn, affects the money supply in the economy.

 Open Market Operations (OMOs): The Bangladesh Bank conducts OMOs to buy or sell
government securities in the market. By buying government securities, the central bank
increases the money supply, while selling securities decreases the money supply.

 Policy Interest Rate: The Bangladesh Bank sets a policy interest rate, also known as the repo
rate, at which it lends money to commercial banks. By raising or lowering the policy interest
rate, the central bank can influence the lending rates in the economy, affecting consumer
spending, investment, and inflation.

 Statutory Liquidity Ratio (SLR): The Bangladesh Bank can set a statutory liquidity ratio, which is
the percentage of deposits that banks are required to keep in the form of liquid assets such as
government securities. By adjusting the SLR, the central bank can influence the liquidity position
of banks and control the money supply in the economy.

The reserve requirement, OMOs, and policy interest rate are used to control the level of liquidity in the
economy, manage inflation, stimulate economic growth, and manage the exchange rate.