Bangladesh Bank Governor Dr. Ahsan H. Mansur has hinted that the central bank may consider reducing the policy interest rate in the coming months—provided that inflation continues its downward trend and stays below the 7 percent threshold.
For the time being, however, the central bank will retain the current repo rate at 10 percent.
Unveiling the monetary policy for the first half of FY2025–26 at a press conference held at Bangladesh Bank headquarters on Thursday, Dr. Mansur said inflation has been brought down to a more tolerable level, but the fight is far from over.
“We’ve been somewhat successful in reducing inflation, which is now around 8.5 percent,” the governor said. “But I won’t be satisfied until it comes down to 3 percent.”
He noted that the tightening of monetary policy over the past year was necessary to curb excess demand and tame inflation. “That’s why we had to raise interest rates. As a result, bank credit and liquidity declined, and the government also adopted a contractionary fiscal policy.”
Addressing supply-side concerns, the governor pointed out that despite last year’s dollar crisis, essential imports such as electricity, fertilizer, and LNG were sustained. The central bank initially fixed the exchange rate at Tk 122 per US dollar but later allowed market dynamics to determine the rate. “There were fears that the dollar rate would spiral to Tk 160 or 170, but that didn’t happen,” he said.
Dr. Mansur suggested that a cut in the policy rate could be on the table if inflation drops at least 3 percentage points below the current 10 percent rate. “If inflation falls to 7 percent, it creates scope to reassess our interest rate stance,” he said.
He also cited early signs of easing in the interest rate environment, with yields on treasury bills and bonds dropping from 12 percent to 10 percent, and the overnight rate declining from 8.5 percent to 8 percent. “We’ve made it less attractive for banks to keep idle funds with the central bank. If they want to make a profit, they’ll need to lend and invest,” the governor said.
Dr. Mansur concluded by underscoring Bangladesh Bank’s commitment to a more strategic and coordinated approach in maintaining price stability and supporting overall macroeconomic resilience.