BB keeps policy rate unchanged amid inflation risks

A high-powered committee of Bangladesh Bank (BB) has decided to keep the policy rate unchanged at 9.5 percent for now, opting to assess the impact of recent domestic and global shocks on inflation and economic growth before making any changes.

The decision was taken at a meeting of the Monetary Policy Committee (MPC), chaired by BB Governor Md Mostaqur Rahman, today.

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In July, the central bank cut its policy, or repo, rate to 9.5 percent from 10 percent, marking its first reduction in six years. The new rate took effect on August 2.

The latest decision comes as Bangladesh continues to grapple with inflation while the government targets bringing it down to 7.5 percent in FY27. Bangladesh Bank has also said it aims to bring inflation around 7.5 percent by June 2027.

The MPC observed that inflation has been trending downward but remains above the government's target ceiling of 7.5 percent for fiscal year 2026-27.

The 12-month moving-average inflation stood at 8.66 percent in August, according to the Bangladesh Bureau of Statistics. Point-to-point inflation was 8.26 percent that month.

Against this backdrop, the MPC decided to closely monitor developments in the domestic and international economies, particularly their impact on gross domestic product growth and consumer price inflation, before changing the existing policy rate.

The panel also identified several factors that could create fresh inflationary pressure in the coming months.

It noted that international energy prices remain volatile amid the prolonged conflict in the Middle East. At the same time, the government raised fuel prices on September 21.

The implementation of the new pay scale could also add to inflationary pressures, according to the minutes.

"Under these circumstances," the committee decided to observe the impacts of domestic and international shocks on the Bangladesh economy, particularly on GDP growth and CPI inflation, before making any changes in the current policy rate.

BB Deputy Governor Dr Md Habibur Rahman, Dr Mustafa Kamal Mujeri, Dr A K Enamul Haque, Dr Firdousi Naher and Dr Imam Abu Sayed attended the meeting.

Dr Mohammad Monirul Islam Sarker, member secretary of the MPC and director of the Monetary Policy Department, was also present. Bangladesh Bank's official MPC roster confirms these names and designations.