The Bangladesh Bank (BB) is going to unveil its monetary policy statement for January to June of the current fiscal year on January 29, at a time when inflation remains elevated despite a high policy rate.
The central bank monetary policy committee is scheduled to meet this week to finalise the policy stance for the six-month period. The proposal will then be placed before the board of directors of the banking regulator for approval on January 25.
BB Governor Ahsan H Mansur will announce the policy at a press conference at the central bank headquarters.
The monetary authority, tasked with managing currency, money supply, and interest rates to maintain price stability, will unveil the policy amid renewed price pressures.
In December, Inflation rose to 8.49 percent from 8.29 percent a month earlier, according to the Bangladesh Bureau of Statistics (BBS).
Industry insiders said inflation is showing signs of heating up again despite the central bank’s tight monetary stance, pointing to supply-side constraints rather than excess demand as the primary driver of rising prices.
The central bank has kept the policy rate unchanged at 10 percent since October 2024, resisting calls from business groups for a rate cut.
Zahid Hussain, a former lead economist at the World Bank’s Dhaka office, said the central bank has little room to ease policy while inflation is high.
Cutting the policy rate at this stage could add to inflationary pressures rather than stabilise prices, he said, adding that the central bank is likely to keep the rate at 10 percent in the near term.
“Inflation is not being driven only by excess demand; supply-side bottlenecks and global supply chain disruptions are also playing a major role in keeping prices elevated,” said the economist.
On exchange rate management, Hussain said Bangladesh Bank is prioritising stability rather than allowing the taka to strengthen against the US dollar.
“Despite steady remittance inflows and improved dollar availability, the central bank is avoiding taka appreciation. While a stronger taka could have reduced import costs, it could also hurt exporters’ earnings and discourage remittance inflows, prompting the central bank to keep the exchange rate stable,” he added.
Private sector credit growth remains subdued, while short-term foreign borrowing has declined, he said. Although lower interest rates could support investment, persistently high inflation limits the scope for such moves.
“Meanwhile, Bangladesh Bank’s dollar purchases have injected liquidity into the banking system, but sluggish credit demand has contained inflationary risks for now,” he noted.
Md Ezazul Islam, director general of the Bangladesh Institute of Bank Management (BIBM), said the central bank should maintain its tight monetary stance for at least the next six months, or at least three months, to rein in inflation.
With an election schedule approaching, demand for credit is likely to rise, he said, commenting that any rate cut at this stage could add to inflationary pressure.
