Inflation-focused monetary policy unveiled

Seeking to contain inflation while safeguarding external sector stability, Bangladesh Bank (BB) has kept its policy repo rate unchanged at 10 per cent, maintaining a cautious monetary policy stance for the July-December period of FY2026-27 amid persistent domestic and global economic challenges.

Under the latest Monetary Policy Statement (MPS), the policy repo rate remains at 10 per cent, while the Standing Lending Facility (SLF) and Standing Deposit Facility (SDF) rates have been retained at 11.5 per cent and 7.5 per cent, respectively.

The central bank identified sluggish GDP growth, elevated inflation, limited fiscal space and financial sector stress as the key near-term macroeconomic challenges facing the economy.

BB Governor Md Mostaqur Rahman announced the new monetary policy at a press conference at the central bank on Tuesday.

Presenting the MPS, the governor reiterated that a market-based exchange rate regime would remain a key pillar of Bangladesh’s macroeconomic stability.

He also reaffirmed the central bank’s commitment to strengthening discipline, transparency and stability in the banking sector through a series of structural reforms.

Deputy Governor Dr Habibur Rahman delivered the keynote presentation, outlining the main features of the new monetary policy framework.

According to the central bank, contractionary policy measures have helped reduce point-to-point headline inflation from a peak of 11.7 per cent in July 2024 to 9.4 per cent in May 2026.

However, inflationary pressures remain elevated due to structural constraints.

Bangladesh Bank said a significant share of the current inflationary pressure stems from persistent structural bottlenecks, supply chain disruptions, higher energy costs and rising import prices.

Against this backdrop, the central bank said maintaining an artificially controlled exchange rate could undermine the competitiveness of domestic industries and place additional pressure on foreign exchange reserves.

Instead, under the market-based exchange rate regime, the exchange rate will continue to adjust in line with market demand and supply.

BB expects the framework to reduce the use of informal hundi channels, encourage remittance inflows through formal banking channels and enhance transparency in the foreign exchange market.

To support economic activity without compromising its inflation objective, the central bank announced a Tk60,000 crore refinancing and stimulus package for agriculture, cottage, micro, small and medium enterprises (CMSMEs), and priority industrial sectors.

Of the total package, Tk41,000 crore will be financed from surplus liquidity within the banking system, while the remaining Tk19,000 crore will come from Bangladesh Bank’s own resources.

The central bank estimates that the programme will generate nearly 2.5 million direct and indirect employment opportunities.