Tight Monetary Policy Persists for First Half of Fiscal Year 26 for BB, With No Changes to Policy Rate
Bangladesh Bank Maintains Tight Monetary Policy Amid Economic Challenges
The Bangladesh Bank has announced its Monetary Policy Statement (MPS) for the first half of FY2025-26, with Governor Ahsan H Mansur revealing the details at a press conference in Dhaka's Motijheel on 31 July.
The policy rate remains unchanged at 10%, a move aimed at maintaining tight monetary conditions as the country navigates ongoing macroeconomic challenges. Inflation targets in the statement aim for a continuation of the downward trend, with inflation having slowed to around 8.5% in June 2025, expected to decline further toward a target range near 6.5% by the end of FY26.
Regarding exchange rate stabilization, Bangladesh Bank continues to emphasize greater exchange rate flexibility supported by rising remittance inflows and a market-driven exchange rate regime. This approach aims to address the volatility of the exchange rate and stabilize the foreign exchange market, which has shown improvement recently.
The overall policy mix includes tight monetary policy accompanied by fiscal consolidation to support macroeconomic stability. The aim of the unchanged policy rate is to maintain a tight policy stance to control inflation, despite cost pressures from nominal depreciation linked to external shocks such as U.S. tariffs.
Governor Ahsan H Mansur expects inflation to be between 3% and 5%, but it will take some time to achieve this. His statement indicates a continued contractionary stance in the monetary policy.
| Aspect | Details | |------------------------|-----------------------------------------------| | Policy Rate | Held steady at 10% for H1 FY2025-26 | | Inflation Target | Inflation projected to ease to ~6.5% by FY26 end; current ~8.5% (June 2025) | | Exchange Rate | Emphasis on exchange rate flexibility to stabilize FX market, supported by remittance inflows and market-driven adjustments | | Monetary Policy Stance | Tight monetary policy to keep inflation declining and maintain macro stability; continuation of fiscal consolidation measures[1][2][3][4] |
This policy maintains a cautious approach given the risks from external demand shocks, tariff issues, and inflationary pressures, aiming for a gradual economic recovery with controlled inflation and a stable foreign exchange environment.
The tight monetary policy maintained by Bangladesh Bank, as revealed in the Monetary Policy Statement, is designed to control inflation and support macroeconomic stability within the business sector of the country, while aiming for a gradual recovery amid economic challenges. The unchanged policy rate of 10% is expected to promote exchange rate stability by addressing volatility, combined with the emphasis on exchange rate flexibility and market-driven adjustments.
