Bangladesh keeps policy rate at 10% as central bank maintains anti-inflation stance

Bangladesh Bank (BB) on Tuesday kept its benchmark policy rate unchanged at 10% for the first half of fiscal year 2026-27, maintaining a tight monetary policy as inflation continues to remain well above the central bank's target.

The monetary policy statement (MPS) for July-December was unveiled at the central bank headquarters by BB Governor Md. Mostaqur Rahman.

Alongside the unchanged repo or policy rate of 10%, the upper limit of the Standing Liquidity Facility (SLF) was retained at 11.5%, while the Standing Deposit Facility (SDF) rate remained at 7.5%.

The policy rate has stayed at 10% since October 2024 after the central bank raised it 11 consecutive times between May 2022 and October 2024.

Bangladesh Bank has pursued a contractionary monetary policy since the first half of FY2023-24, aiming to curb inflation by keeping borrowing costs high and containing excess liquidity.

Despite the prolonged tightening cycle, inflation remains elevated.

Official data showed overall inflation rose to 9.42% in May, the highest level since February 2025. Inflation has remained above 9% for two straight months.

Food inflation stood at 9.06%, while non-food inflation reached 9.71%. Both urban and rural areas recorded inflation above 9%, reflecting broad-based price pressures across the economy.

The 12-month average inflation stood at 8.63% in May, remaining well above the central bank's 7% target. Average inflation reached 10% in FY2024-25, marking another year of missed inflation goals.

BB said it expects inflationary pressures to gradually ease in the coming months as its tight monetary stance has kept real interest rates positive, although subdued private investment and external uncertainties continue to weigh on economic growth.

The central bank has previously attributed persistent inflation to the Russia-Ukraine war, Middle East conflicts, sharp depreciation of the taka, volatile global commodity prices, fuel price hikes, heavy government borrowing and supply chain disruptions.

Economists, however, remain cautious as the new fiscal year's expansionary budget and a stimulus package worth nearly Tk 600 billion could boost economic activity but also increase demand and liquidity, potentially adding fresh inflationary pressure.