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Bangladesh Bank has announced its monetary policy for the second half of the current fiscal year (January–June), keeping the policy interest rate unchanged as inflation has yet to fall to the desired level.
The central bank said it would continue its contractionary monetary stance until inflation declines to 7 per cent.
The policy was unveiled yesterday by Governor Dr Ahsan H Mansur at a press briefing at the Bangladesh Bank headquarters in Motijheel, Dhaka. He said that although inflation had eased slightly, the pace of decline remained too slow, leaving no room at this stage for an interest rate cut.
Under the newly announced policy, the policy rate (repo rate) has been maintained at 10 per cent, unchanged since October 2024. The monetary policy sets a private sector credit growth target of 8.5 per cent by June, up from 8 per cent in the previous policy. However, private sector credit growth stood at 6.1 per cent in December, against a target of 7.2 per cent.
Deputy Governor Dr Habibur Rahman said the target had been revised upwards in anticipation of increased demand for private sector credit once a politically stable government takes office.
According to Bangladesh Bank data, the target for public sector credit growth was set at 20.5 per cent up to December, but actual growth surged to 28.9 per cent. In the new policy, public sector credit growth is projected at 21.6 per cent by June.
Meanwhile, money supply growth reached 9.6 per cent in December, exceeding the target of 7.8 per cent. The central bank projects money supply growth to rise further to 11.5 per cent by June.
Governor Mansur said Bangladesh Bank had purchased around USD4.3 billion from the market, injecting approximately Tk50,000 crore into the economy, which has contributed to the higher growth in money supply.
The monetary policy statement noted that inflation rose for the third consecutive month in January, reaching 8.58 per cent.
Business concerns over tight policy
Reacting to Bangladesh Bank’s decision to maintain its contractionary monetary stance, the Dhaka Chamber of Commerce and Industry (DCCI), one of the leading representatives of the private sector, expressed disappointment.
In a statement issued yesterday, the chamber said that despite the prolonged implementation of tight monetary policy, inflation had not been brought under effective control and the policy had failed to deliver the expected results. Instead, it said, productive economic activity had been severely affected.
The DCCI noted with concern that private sector credit growth fell to 6.1 per cent in December, the lowest level in 22 years. Abnormally high interest rates and excessive borrowing costs, it said, have effectively stalled industrial expansion, new investment and job creation.
The chamber also pointed out that private sector investment growth declined to 22.48 per cent in fiscal year 2025, down from 24.18 per cent in fiscal year 2023. It concluded that achieving sustainable economic growth under such an ineffective monetary policy was unrealistic for any country.
