US Fed interest hike won’t affect Bangladesh economy: Experts
The recent interest rate hike by the US Federal Reserve won’t affect Bangladesh’s economy as both the private and public sectors here are not highly indebted to foreign lenders, experts said.
“It will rather give our economy a comfortable position as local entrepreneurs might not be willing to borrow from abroad after the rate hike. It might be a blessing for us as the demand for local credit will increase,” Allah Malik Kazemi, change making advisor of Bangladesh Bank (BB), said on Thursday.
He said local enterprises recently borrowed from external sources because of low interests, and as result, the country’s banking sector have been suffering from low demand for credit, which ultimately increased the pile of idle money.
The US Federal Reserve hiked interest rates by a quarter of a percentage point to between 0.25 percent for the first time in nearly a decade on Wednesday, and signaled that the process would gradually continue, according to international media reports.
There were wide ranges of predictions that the large stock exchanges, lending institutions and emerging developing countries which have high debt will suffer for the interest rate hike by the US Federal Reserve.
In the run up to the Fed’s decision, analysts believed higher US rates could pose a challenge to a number of emerging market economies – particularly across Asia, a top exporter to the US – by pushing up bond yields, augmenting capital outflows and depreciating currencies.
“Our country is not highly indebted, neither the private sector nor the government. So, we have nothing to fear,” Kazemi said.
Former Securities and Exchange Commission (SEC) chairman Ziaul Haq Khandker said the Bangladesh’s stock market won’t face any impact of the Fed rate hike there is not much foreign investment here.
He said Bangladesh earned a good reputation as a borrower from donors and became much resilient to external shocks due to effective fiscal and monetary policies.
The US Federal Reserve hiked interest rate based on strong sign of improving labour market in the country and hoped of much better in the days to come.
By the move, the US central bank’s policy-setting committee ended a lengthy debate about whether the economy was strong enough to withstand higher borrowing costs.
“The Committee judges that there has been considerable improvement in labour market conditions this year, and it is reasonably confident that inflation will rise over the medium term to its 2 percent objective,” the Fed said in its policy statement, which was adopted unanimously.
However, the initial reactions across Asia have been largely positive, with markets across the region registering gains on the back of the Fed move. But while a Fed rate raise of 0.25 percentage points is a small step, financial markets are more concerned about what is coming down the road from the Fed.