Staff Correspondent:

Bangladesh Bank has decided to keep the policy rate unchanged at 10 per cent for the first half of the 2025-26 fiscal year, prioritising inflation control over immediate stimulus measures, despite growing calls from the business community to cut interest rates.

The decision was announced by Bangladesh Bank Governor Dr Ahsan H Mansur during a press conference at the central bank’s headquarters in Dhaka on Thursday, July 31.

Senior officials, including Deputy Governors, policymakers, chief economists, research directors, and spokespersons, were present at the event.

INFLATION DROPS TO 35-MONTH LOW, BUT VIGILANCE CONTINUES

In his address, Governor Mansur noted that inflation has declined to its lowest level in 35 months, reaching 5.7 per cent in June 2025. However, he emphasised that the central bank will not ease monetary policy until inflation sustains below 7 per cent.

“The repo rate will remain at 10 per cent until inflation is firmly and permanently anchored below 7 per cent,” he said. “Our primary mandate is price stability.”

To reinforce this stance, he said the Standing Lending Facility (SLF) rate will remain unchanged at 11.5 per cent

And the Standing Deposit Facility (SDF) rate has been reduced by 50 basis points to 8 per cent, effective July 15, to improve liquidity management and encourage banks to lend rather than park excess funds with the central bank.

BUSINESS COMMUNITY CALLS FOR RATE CUTS

The private sector has been urging a reduction in interest rates to stimulate investment and credit growth, which has slowed to 6.40 per cent – a multi-year low.

Business leaders argue that lower borrowing costs are essential to revive economic momentum.

However, the central bank remains cautious. “While we recognize the need for credit expansion, premature easing could risk reigniting inflation,” said Dr Mansur. “Our approach is data-driven and forward-looking.”

KEY TARGETS FOR FY 2025-26

The new monetary policy aligns with the government’s broader economic goals outlined in the national budget: Bringing average inflation down to 6.5 per cent by June 2026, setting GDP growth target at 5.5 per cent for the fiscal year.

POLICY STABILITY AMID GLOBAL UNCERTAINTY

The policy rate was last increased by 50 basis points to 10 per cent on October 22, 2024, in response to rising inflationary pressures. Since then, consistent monetary tightening and improved supply conditions have helped bring inflation under control.

Repo operations allow commercial banks to borrow short-term funds from Bangladesh Bank by pledging government securities as collateral – making the repo rate a key tool for managing liquidity and influencing market interest rates.

LOOKING AHEAD

Bangladesh Bank reaffirmed its commitment to maintaining macroeconomic stability while gradually supporting growth through improved credit flow and financial sector reforms.

“The path forward is balance,” said Governor Mansur. “We must ensure that our hard-won gains in inflation control are not undone. Once stability is secured, we can shift focus to sustainable growth.”

The next monetary policy review is scheduled for the second half of the fiscal year. Until then, the message is clear:  Inflation first. Stimulus later.