Bangladesh Bank holds policy rate at 10%

Bangladesh Bank (BB) has kept its benchmark policy repo rate unchanged at 10%, maintaining a tight monetary policy stance in the first half of FY27 while unveiling a Tk60,000 crore stimulus package aimed at reviving private sector activity, supporting key productive sectors and creating employment.

In its latest monetary policy statement, the central bank said its primary objective remains maintaining low and stable inflation in line with the Bangladesh Bank Order, 1972 (amended in 2003).

It said price stability is essential for sustaining economic growth, encouraging investment, maintaining exchange rate stability and facilitating international trade.

The central bank noted that inflation has eased from a peak of 11.7% in July 2024 to 9.4% in May 2026 following a prolonged period of monetary tightening.

However, inflation remains above the government's target, prompting BB to continue its contractionary policy despite signs of slower economic growth.

Bangladesh Bank said the policy repo rate will remain at 10.0%, while the Standing Lending Facility (SLF) rate will stay at 11.5% and the Standing Deposit Facility (SDF) rate at 7.5%.

The central bank said Bangladesh's economy continues to face multiple challenges, including elevated inflation, weak private investment, employment pressures, high non-performing loans, energy supply uncertainties and growing geopolitical risks.

It warned that ongoing tensions in the Middle East could disrupt global oil and fertiliser supply chains, adding further cost-push inflationary pressure.

According to the monetary policy statement, private sector credit growth slowed to 5.0% by the end of May 2026 as higher interest rates, rising loan defaults and increased government borrowing reduced credit demand and encouraged banks to invest surplus liquidity in government securities.

To support economic recovery without abandoning its anti-inflation stance, BB announced a Tk60,000 crore targeted stimulus package for industries, agriculture and cottage, micro, small and medium enterprises (CMSMEs). Of the total amount, Tk41,000 crore will come from surplus liquidity in the banking sector, while the remaining Tk19,000 crore will be financed from Bangladesh Bank's own resources.

The central bank expects the programme to generate nearly 2.5 million direct and indirect jobs while helping industries restore production capacity.

Bangladesh Bank also reiterated its commitment to a flexible, market-based exchange rate regime to strengthen external sector resilience, improve export competitiveness and encourage remittance inflows.

On financial sector reforms, the central bank said it is strengthening oversight of non-performing loans through enhanced audits and a revised resolution framework supported by the Bank Resolution Act 2026 and the Deposit Protection Act 2026.