Bangladesh Bank on Monday announced the monetary policy for the January-June period of the current 2025-26 fiscal year, maintaining a tight monetary stance by keeping the key policy rate unchanged at 10 percent while raising credit growth targets to support investment ahead of the upcoming 13th National Parliamentary Election and the Referendum.
Bangladesh Bank Governor Dr Ahsan H Mansur unveiled the policy at a press conference on 9 February.
The decision comes as inflation remains stubbornly high, rising for the third consecutive month to 8.58 percent in January, largely driven by higher food prices ahead of Ramadan, when demand typically increases.
Despite the current pressure, the central bank has set a target to bring average inflation down to 7 percent by the end of the fiscal year.
While holding the headline policy rate steady, Bangladesh Bank moved to encourage lending and ease liquidity pressures in the interbank market by cutting the Standing Deposit Facility (SDF) rate by 50 basis points to 7.5 percent. The SDF rate applies when banks deposit surplus funds with the central bank.
“We want banks to invest rather than keep money with Bangladesh Bank. That is why the SDF rate has been reduced, and it will be reduced further in the future,” Governor Mansur said.
The Standing Lending Facility (SLF) rate, which governs interbank borrowing, has been kept unchanged at 11.50 percent. The repo rate—through which banks borrow short-term funds from the central bank against government securities—was last raised by 50 basis points to 10 percent in October 2024.
Reflecting expectations of improved economic activity and employment after the election, the central bank has slightly increased the private sector credit growth target. Private sector credit growth stood at 6.1 percent as of December. The target has now been raised from 8 percent to 8.5 percent by June.
Government sector borrowing targets have also been adjusted. In the new policy, public sector credit growth has been set at 21.6 percent. In the previous fiscal year, the government’s borrowing target was 20.5 percent, but actual borrowing rose sharply to 28.9 percent by December.