Bangladesh Bank has declared that it will continue to pursue a contractionary monetary policy for the first half of the upcoming fiscal year, maintaining the policy interest rate at its current level and further lowering the private sector credit growth target in order to keep inflation under control.
According to the central bank, the repo rate will stay at 10% from July through December of this year. Ahsan H. Mansur, the governor of BB, had earlier stated that the rate would not be lowered until the inflation rate dropped below 7%.
Banks can borrow funds for a single day at the repo rate. Consequently, it is recognized as a significant policy instrument within the banking industry, and the interest rate applied to it is referred to as the policy interest rate. The central bank can adjust this rate to influence the liquidity and investment levels in the market.
When the repo rate increases, it becomes more expensive for banks to secure funds from the central bank. This also raises the interest rates on loans that businesses can acquire from banks.
By keeping the rate steady, the central bank is preserving its control over the money flow in the market without easing it.
Governor Mansur revealed the second monetary policy of his term during a press conference on Thursday at the Bangladesh Bank headquarters in Dhaka’s Motijheel. Bangladesh Bank Deputy Governor Habibur Rahman presented the policy.
The new target for private sector credit growth for the remainder of 2025 is set at 7.2 percent, a reduction from the previous target of 9.8 percent stated in the last monetary policy announcement.
In contrast, public sector credit growth has surged from 17.50 percent in the last announcement to 20.40 percent in the current one. In December of the previous year, it was recorded at 14.2 percent.
“The main problem for Bangladesh Bank at the moment is managing inflation,” Mansur said. “In the future, we want to significantly reduce inflation. Already, inflation has decreased from its peak.
The Standing Lending Facility (SLF) and the Standing Deposit Facility (SDF) have remained at 11.50 percent and 8 percent, respectively, under the current monetary policy.
According to the monetary policy, Bangladesh Bank would keep stepping in to stabilize the dollar’s exchange rate and replenish its foreign exchange reserves.
