Dhaka: Bangladesh Bank (BB) will continue its ‘tight’ approach in the monetary policy statement (MPS) for the second half (H2) of the fiscal year 2024-25 (FY25), anticipating a reduction in the general inflation rate to 7-8 percent by June this year. “The main goals of MPS are to contain inflation, stabilize the foreign exchange market while building foreign exchange reserves of BB, and address the rapidly rising non-performing loans in banks and financial institutions. Given the global and domestic realities, BB remains committed to a tight monetary policy stance for the second half of FY25,” said BB Governor Dr. Ahsan H Mansur during a press conference at the central bank headquarters.
According to Bangladesh Sangbad Sangstha, the Bangladesh Bureau of Statistics (BBS) reported a slight easing of the general point-to-point inflation rate in January, decreasing to 9.94 percent from 10.89 percent in December 2024. Deputy Governor of the central bank, Dr. Md Habibur Rahman, stated in a presentation that the central bank has decided to maintain the policy rate unchanged at 10.0 percent, in light of the recent inflation results. He noted that the Standing Lending Facility (SLF) rate will remain at 11.5 percent, while the Standing Deposit Facility (SDF) rate will stay at 8.5 percent, creating a policy rate corridor of ± 150 basis points.
Dr. Rahman further explained that BB anticipates a decrease in inflation in the coming months, supported by actions already taken by the monetary and fiscal authorities, continued stability in the exchange rate, ongoing global commodity price moderation, and expected output expansion in agricultural products like rice (boro) and other crops. The central bank will continuously monitor inflation trends, adjusting interest rates and liquidity measures as necessary.
BB has been implementing a crawling peg exchange rate mechanism to enhance both flexibility and stability in the foreign exchange market. This framework aims to ensure exchange rate stability while preparing for a transition to a more flexible system. BB has halted foreign exchange sales in the interbank market to support this stability, establishing a methodology for calculating the Foreign Exchange Spot Reference Exchange Rate (RR), published twice daily. Prudent exchange rate management is anticipated to strengthen remittance inflows, stimulate exports, and augment foreign exchange reserves.
The central bank, in collaboration with the government, has embarked on ambitious reform initiatives to avert potential crises in the banking system and promote long-term economic stability. These reforms aim to restore sound governance practices and enhance stakeholder confidence, fostering a resilient financial environment for future growth. Following a student-led mass uprising that forced an authoritarian regime to step down on 5 August 2024, Bangladesh is undergoing significant political and economic transformation, presenting opportunities for necessary financial sector reforms.
In this context, BB has initiated essential reforms to address long-standing structural problems in the banking sector, focusing on macro-economic stability, price stability through lower inflation, and restoring trust in the financial sector. The central bank has developed clear strategies and established three taskforces to conduct a comprehensive asset quality review, enhance BB’s capacity and efficiency, and pursue the recovery of stolen assets. This edition of BB’s half-yearly MPS outlines the monetary policy approach for H2 of FY25, considering political and economic conditions, global and domestic market trends, and data from the first half of FY25.