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Published : 31 Jul 2025, 03:19 AM
Bangladesh Bank is set to release a new contractionary monetary policy for July-December that keeps taming inflation at its core, according to officials involved in drafting the document.
The central bank faces the familiar dilemma of reining in prices without stifling growth, while also reviving investment and maintaining financial stability.
With global uncertainty persisting and domestic price pressures stubborn, it appears poised to err on the side of caution.
“We will stay on a tightening path until inflation falls to around 6 percent,” a senior central‑bank official said on condition of anonymity.
Economists say the current economic climate leaves the central bank with little choice but to continue tightening.
The policy will be the second under Governor Ahsan H Mansur.
Officials involved in the preparation hinted that the policy rate may remain unchanged at 10 percent, with a further squeeze on private sector credit growth.
Economists argue that given the current investment climate, lowering interest rates or pushing more credit into the private sector is unlikely to yield meaningful benefits.
As with previous policies, the central focus will likely remain on restraining inflation while also supporting growth, reviving investment and creating a stable financial environment.
Analysts believe this balancing act is one of the central bank’s main challenges at this stage.
A senior central bank official, speaking on condition of anonymity said the bank is likely to stick to its tightening path until inflation is brought down to around 6 percent.
For the second half of the year, the private sector credit growth target may be revised to 7.2 percent, down from 9.8 percent set for January to June.
The actual growth, however, has hovered around 8 percent for the last seven months.
For the full fiscal year, the target may be set at 8 percent.
While inflation and credit growth will likely remain central to the upcoming policy, economist Zahid Hussain believes the central bank must also outline its approach to banks facing financial distress in the next six months.
“The market is watching,” said the former World Bank Dhaka chief economist. “Depositors, banks and others are looking for clarity.”
INFLATION
Inflation remains above Bangladesh Bank’s target, with analysts expecting the contractionary stance to continue.
They stress the need for a clearer statement on how long the current policy rate will stay in place.
“Inflation is still 2.5 to 3 percentage points above the central bank’s goal,” said Zahid. “The new policy must clarify whether the rate will only be lowered once inflation nears that target.”
Data from the Bangladesh Bureau of Statistics shows that overall inflation dipped slightly to 8.48 percent in June.
