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Published : 31 Jul 2025, 05:21 PM
With the aim of maintaining control of inflation, Bangladesh Bank has announced that it will continue to implement a contractionary monetary policy for the first half of the new fiscal year, keeping the policy interest rate unchanged while further reducing the credit growth target in the private sector.
The central bank said that the repo rate will remain at 10 percent from July to December this year. BB Governor Ahsan H Mansur had previously said that the rate would not be decreased until the inflation rate fell below 7 percent.
Banks can borrow money for a single day at the repo rate. As such, it is known as a major policy tool in the banking sector and the interest rate charged on it is also known as the policy interest rate. The central bank can control the rate to control the level of liquidity and investment in the market.
When the repo rate rises, it becomes more costly for banks to obtain funds from the central bank. It also increases the interest rate on loans that businesses can obtain from banks.
By keeping the rate unchanged, the central bank is maintaining its control over the flow of money in the market without loosening it.
Governor Mansur announced the second monetary policy of his tenure at a press conference on Thursday at the Bangladesh Bank offices in Dhaka’s Motijheel. Bangladesh Bank Deputy Governor Habibur Rahman read out the policy.
The new target for private sector credit growth for the rest of 2025 is 7.2 percent, down from the 9.8 percent target in the last monetary policy declaration.
Public sector credit growth, on the other hand, has jumped from 17.50 percent in the last declaration to 20.40 percent in the new one. In December last year, it had stood at 14.2 percent.
“Controlling inflation is Bangladesh Bank’s main challenge at the moment,” Mansur said. “We hope to reduce inflation further going forward. Inflation has already decreased from what it used to be.”
The new monetary policy has kept the Standing Lending Facility (SLF) at 11.50 percent and the Standing Deposit Facility (SDF) at 8 percent.
The monetary policy states that Bangladesh Bank will continue to intervene in the market to stabilise the exchange rate of the dollar and rebuild foreign exchange reserves.
