Should Bangladesh monitor core inflation for conducting monetary policy

One of the central objectives of traditional monetary policy is inflation control since the belief is that, among others, low inflation helps to improve resource allocation and fosters rapid and stable economic growth. The view also holds that inflation is primarily a monetary phenomenon so that low inflation is to be achieved mainly through aggregate demand control by pursuing contractionary monetary (and fiscal) policies. It is argued that these policies should also be supported by liberalization, privatization, and other macroeconomic reforms to create a more open and competitive economy driven by the private sector. In short, the argument is that there exists a trade off between inflation and growth (alternatively between inflation and unemployment) that makes inflation targeting as the dominant paradigm in monetary policy.