Bangladesh Bank has opted to maintain a restrictive monetary policy for the second half of fiscal year 2026–27, keeping its key policy repo rate unchanged at 10% despite sustained pressure from the business community for lower borrowing costs. The decision, approved by the central bank’s board as part of the Monetary Policy Statement (MPS) for January–June, underscores policymakers’ continued focus on curbing inflation, which remains stubbornly above target.
Officials said the formal announcement of the MPS would be made shortly, but key parameters have already been settled. Inflation, although easing from its peak, has yet to fall to the 6.5% target set for FY26. In December, consumer price inflation stood slightly above 8%, well beyond the central bank’s comfort zone. In its previous policy statement, Bangladesh Bank had committed to sustaining a tight stance until inflation dropped below 7%, a threshold it has not yet reached.
Private sector credit growth targets have therefore been left unchanged at 8%, compared with actual growth of 6.2%, reflecting subdued demand following the political transition in August 2024. By contrast, the ceiling for public sector credit growth is expected to rise to 19%, from 18% previously, indicating a modestly expansionary fiscal footprint amid tighter monetary conditions.
Key Monetary and Financial Indicators
| Indicator | Current Position | Previous/Reference |
|---|---|---|
| Policy repo rate | 10% | Unchanged |
| Inflation (Dec) | Just over 8% | Target 6.5% |
| Private sector credit growth | 6.2% actual | 8% target |
| Public sector credit growth ceiling | 19% | 18% |
| Average lending rate | ~12% | Past six months |
| Average deposit rate | >6% | Past six months |
| Exchange rate | Tk122–123/USD | Stable for one year |
Despite the prolonged tight stance, both lending and deposit rates have edged slightly higher. Over the past six months, average lending rates have hovered around 12%, while deposit rates have remained above 6%, according to central bank data.
Governor Ahsan H Mansur has acknowledged business concerns but insists that easing policy prematurely would undermine progress on inflation. “I fully understand the sentiments of the business community – I also want to reduce interest rates,” he said. “But from a policy perspective, this is not yet the right time.” He noted that inflation had fallen from around 12.5% to about 8.5%, calling it meaningful progress but insufficient to justify a shift. The medium-term goal, he said, is to bring inflation down to 3–4% within two years.
On the external front, the governor highlighted significant gains. Since moving towards a more flexible exchange rate regime in May 2025, Bangladesh Bank has not sold dollars into the market; instead, it has purchased $3.7 billion since August 2024. The current account is now broadly balanced, the financial account has swung into surplus, and foreign exchange reserves are on a gradual upward path. Gross reserves stood at over $28 billion in late January, while the exchange rate has remained remarkably stable.
The central bank is targeting reserves of $35–36 billion by June, alongside a reversal of capital outflows and renewed interest from foreign investors—developments officials describe as evidence that macroeconomic stability is steadily being restored.