Bangladesh Bank is preparing to gradually transition to an inflation-targeting monetary policy framework as inflation has remained above 9% for several consecutive months despite high interest rates.
The central bank unveiled the proposal at the first meeting of the Parliamentary Standing Committee on the Ministry of Finance of the 13th National Parliament on Sunday. Deputy Governor Habibur Rahman presented a paper titled “Bangladesh Bank and Monetary Policy,” outlining the proposed shift.
Under the planned framework, Bangladesh Bank would prioritize maintaining inflation within a predetermined target range rather than focusing primarily on interest rates. Policy instruments such as interest rates, liquidity management, and exchange rate measures would be used to achieve the inflation target.
The central bank also said amendments to the Bangladesh Bank Order, 1972 would be needed to strengthen its legal independence and improve the effectiveness of monetary policy.
According to the Bangladesh Bureau of Statistics (BBS), inflation stood at 9.16% in June, remaining above 9% for the fourth straight month. During the parliamentary meeting, several lawmakers questioned why inflation had not eased despite the policy interest rate being increased to 10%.
Committee Chairman Mushfiqur Rahman said members expressed concern over high lending rates and their impact on businesses, adding that the issue would be discussed further in future meetings.
Bangladesh Bank said successful implementation of an inflation-targeting framework would require greater central bank independence, improved inflation forecasting, market-based interest rates, stronger coordination between monetary and fiscal policies, and a more market-driven exchange rate.
The central bank also emphasized that raising interest rates alone is insufficient to control inflation. It said coordinated measures involving exchange rate policy, fiscal management, and improvements in supply chains are needed, while global market volatility and supply-side constraints continue to keep inflation under pressure.
The meeting was attended by Finance Minister Amir Khasru Mahmud Chowdhury, Bangladesh Bank Governor Md. Mostakur Rahman, and senior officials from the Finance Ministry, the National Board of Revenue (NBR), and the Economic Relations Division (ERD).
