Bangladesh Bank (BB) today unveiled its monetary policy for the July-December period of the 2026-27 financial year, keeping the policy rate unchanged at 10 percent as part of its battle to tame persistent inflation.

The policy rate, or repo rate, is the rate at which commercial banks borrow from the central bank. It has been kept unchanged at 10 percent since October 2024, following 11 consecutive hikes between May 2022 and October 2024.

The central bank has been maintaining a contractionary monetary policy stance since the first half of the 2023-24 fiscal year to curb inflation by making money more expensive and reducing excess demand. It managed to lower point-to-point headline inflation from 11.7 percent in July 2024 to 9.42 percent in May 2026.

Despite that, inflation remains stubborn, with the 12-month average standing at 8.63 percent that month, indicating that overall inflation is likely to stay well above BB's target of 7 percent at the end of June this year.

This would mark at least the sixth consecutive year that inflation has exceeded the central bank's set target. In FY25, average inflation hit 10 percent, and it was 9.73 percent in June 2024.

Bangladesh Bank (BB) has set a 7.5 percent inflation ceiling and targets 6.5 percent GDP growth for FY27, aligning with the government budget, according to the monetary policy statement.

The central bank noted that the economy faces a fragile recovery with elevated inflation, high non-performing loans, and energy uncertainties. BB warned that monetary tightening alone cannot resolve structural inefficiencies, while Middle East tensions pose risks to supply chains.