B Mirror Report: Bangladesh Bank has announced its monetary policy for the second half (January–June) of the current fiscal year 2025–26, increasing the target for private sector credit growth while keeping the policy interest rate unchanged.

On Monday (February 9), Bangladesh Bank Governor Dr. Ahsan H. Mansur unveiled the new monetary policy. This is the third monetary policy announced under the interim government and during the tenure of the current governor.

The central bank formulates and announces monetary policy to strike a balance between controlling inflation and achieving the desired level of economic growth. Monetary policy plays a crucial role in the country’s financial management, as it outlines plans regarding changes in domestic credit, money supply, domestic assets, and foreign assets. Bangladesh Bank announces monetary policy twice a year for the periods January–June and July–December.

According to the central bank, the target is to bring average inflation down to 7 percent in the current fiscal year, although inflation currently stands at 8.58 percent.

Bangladesh Bank last revised the policy rate on October 22, 2024, increasing the key policy rate (repo) by 50 basis points to 10 percent. Commercial banks primarily take short-term loans from the central bank against government securities through the repo facility.

Under the new monetary policy, the policy rate for interbank borrowing through the Standing Lending Facility (SLF) will remain unchanged at 11.50 percent. Meanwhile, the Standing Deposit Facility (SDF) rate has been reduced from 8 percent to 7.50 percent. This rate applies when banks deposit funds with the central bank.

The governor said the central bank wants banks to invest their funds rather than park money with Bangladesh Bank. For this reason, the SDF rate has been reduced and may be lowered further in the future.

Although the private sector credit growth target was higher in the previous monetary policy, it was not achieved. However, anticipating an increase in investment in the post-election period, the target for private sector credit growth has been slightly raised in the new six-month monetary policy. As of December, private sector credit growth stood at 6.1 percent. The target has now been increased from 8 percent to 8.5 percent by June.

Similarly, government sector borrowing also fell somewhat short of the target. In the new monetary policy, the credit growth target for the public sector has been set at 21.6 percent. In the previous fiscal year, the target for government borrowing was set at 20.5 percent, but actual borrowing reached 28.9 percent by December.