B Mirror Report : Bangladesh Bank has decided to keep its policy repo rate unchanged at 10 percent for the second half of the current fiscal year 2026–27, prioritising inflation control despite persistent demands from the business community for lower borrowing costs.
Officials said the central bank’s board approved the Monetary Policy Statement (MPS) for January–June on Tuesday, with the formal announcement set to be made tomorrow.
The repo rate the rate at which Bangladesh Bank provides funds to commercial banks—has been maintained at 10 percent as inflation has yet to ease to the 6.5 percent target set for FY26 in the previous policy framework. While inflation moderated slightly to just over 8 percent in December, it remains significantly above the central bank’s desired level.
In the earlier MPS, Bangladesh Bank committed to a tight monetary policy stance until inflation declined below 7 percent.
Under the new policy, the private sector credit growth target remains unchanged at 8 percent, compared to the current growth of 6.2 percent. Meanwhile, the public sector credit growth ceiling is expected to rise to 19 percent from the earlier limit of 18 percent.
Despite the continuation of a tight monetary policy since last year, both lending and deposit rates have increased marginally, reflecting weak private sector demand following the political transition in August 2024. Central bank data show that over the past six months, the average lending rate has remained around 12 percent, while deposit rates have stayed above 6 percent.
Bangladesh Bank Governor Ahsan H Mansur acknowledged concerns raised by businesses over high interest rates but said conditions are not yet suitable for a policy shift.
“I fully understand the concerns of the business community—I also want interest rates to come down. However, from a policy standpoint, this is not the right time,” he told The Business Standard.
The governor noted that inflation has fallen from 12.5 percent to 8.5 percent, calling it progress but insufficient. “Our objective is to bring inflation down to 3–4 percent within the next two years. Once that happens, interest rates will naturally decline,” he said.
He also pointed out that managing inflation expectations would take time. “People now expect prices to rise by 10 percent. Changing this mindset is a gradual process. Although exchange rate pressures have largely been neutralised, domestic pressures are still present.”
In May 2025, Bangladesh Bank adopted a more flexible exchange rate regime to improve market stability. Since August 2024, the central bank has refrained from selling dollars in the market and instead purchased $3.7 billion, marking a sharp reversal from previous years.
Governor Mansur said the current account is now broadly balanced, while the financial account—previously in deficit—has posted a sizable surplus.
“Our overall balance was positive last year and continues to remain strong this year, leading to a gradual increase in reserves,” he said.
He added that during his tenure, the International Monetary Fund disbursed around $700 million, while Bangladesh Bank purchased more than twice that amount from the foreign exchange market.
“When the IMF delayed fund disbursement until a new government was formed, we made it clear that we were not facing a crisis and did not urgently need the funds,” the governor said.
Bangladesh Bank aims to raise foreign exchange reserves to $35–36 billion by June this year, using its own calculation method, with further growth expected alongside rising imports and exports.
According to IMF methodology, the country’s gross foreign exchange reserves stood at over $28 billion as of 22 January, up from $26.7 billion in June. The exchange rate has remained stable at Tk122–123 per US dollar over the past year.
The governor also highlighted the reversal of capital outflows as a major success, noting that foreign investors who previously withdrew funds are now returning with fresh investments.
