Macroeconomic challenges likely to persist in H1 of FY26: BB
Domestically, the economy may continue to face macroeconomic challenges
Bangladesh's economy is set to navigate a challenging landscape in the first half of Fiscal Year 2025-26 (July-December), with persistent inflation, pre-election uncertainties, and a slowdown in key economic indicators casting shadows on the immediate outlook, the Bangladesh Bank said in its Monetary Policy Statement today (31 July).
The central bank, in the MPS, acknowledged these significant domestic pressures, alongside external threats such as the impact of potential tariff shocks on export growth.
In a press conference held at the central bank's headquarters in Motijheel, Governor Ahsan H Mansur announced that the policy rate would remain unchanged at 10%, signalling a continued tight monetary policy stance.
The governor explained that this decision is aimed at containing the high inflation.
Keep updated, follow The Business Standard's Google news channel
Despite some moderation, the inflation rate remains above the central bank's desired threshold for a rate reduction.
"We aim to bring down inflation between 3% and 5% but it will take some time. That's why we are continuing our contractionary stance," Mansur said.
The Bangladesh Bank's MPS for H1 FY26 delineates a monetary policy aligned with the interim government's budgetary targets of achieving 5.5% GDP growth and containing inflation within a 6.5% ceiling for FY26.
However, the path to these targets is laden with challenges, according to the MPS.
Domestically, the economy may continue to face macroeconomic challenges. The persistence of inflation remains a primary concern for the central bank, as it continues to erode purchasing power.
The tight monetary policy aims to temper demand-side pressures, but external factors like global commodity prices and internal supply-chain constraints often complicate the fight against rising costs.
The central bank has affirmed its commitment to continue intervening in the forex market to curb exchange rate volatility and rebuild reserves.
According to the MPS, Bangladesh Bank will continuously monitor inflation trends and the liquidity situation in the domestic market.
"Once current developments and projections consistently show a decline in inflation and the policy rate in real terms reaches 3.0%, the central bank will gradually begin to lower the policy rate," reads the statement.
It also stated that if exports weaken due to tariff shocks and the weaker global growth outlook, accompanied by depreciation pressures, Bangladesh Bank will adjust the policy rate as needed to cushion the short-term impact while safely guiding its inflation objectives.
