BB keeps policy rate at 9.50pc in first quarterly monetary policy

Bangladesh Bank (BB) has kept its policy rate unchanged at 9.50 percent for the October-December quarter.

The decision was taken in the backdrop of persistent inflation risks amid weak economic growth, banking sector stress and heightened global uncertainties, said central bank's first-ever Quarterly Monetary Policy Statement (MPS).

“Policy rate has kept unchanged at 9.50 percent for the October-December quarter as inflationary pressures and global and domestic risks remain significant,” Deputy Governor Dr Habibur Rahman said while presenting the policy in the presence of senior central bank officials on Wednesday, according to BSS report. 

It’s the first quarterly monetary policy of the central bank, shifting from previous semi-annual policy framework aimed at making the monetary policy more responsive to changing economic conditions.

“The recent decline in inflation does not yet provide sufficient evidence of a durable return to price stability,” he said, explaining the decision to maintain a cautious monetary policy stance.

Dr Habibur said the Monetary Policy Committee (MPC) at its 14th meeting on September 23, decided to keep the policy benchmark rate unchanged at 9.50 percent. 

The Standing Lending Facility (SLF) rate remains at 11 percent and the Standing Deposit Facility (SDF) rate at 7.50 percent.

The MPC had reduced the policy rate by 50 basis points to 9.50 percent with effect from August 2.

The deputy governor said Bangladesh Bank was closely monitoring several risks to the inflation outlook, including volatility in global energy and fertilizer prices, possible disruptions to maritime trade through the Strait of Hormuz, the impact of recent domestic fuel price increases and potential fiscal expansion following implementation of the national pay scale.

He said headline inflation declined to 8.26 percent in August from 9.16 percent in June, reaching a 10-month low, mainly due to a decline in food inflation.

Food inflation fell to 7.02 percent in August, while non-food inflation remained considerably higher at 9.32 percent, he said.

“Non-food inflation remains a major concern,” Dr Habibur said, noting that higher domestic fuel prices could increase transport and production costs and create further cost-push pressure across the economy.

On economic growth, he said Bangladesh’s real GDP growth was estimated at 4.14 percent in FY2025-26, while quarterly growth slowed to 2.2 percent in the third quarter.

Industrial output contracted by 0.28 percent during the quarter, while several high-frequency indicators, including industrial production, power generation, fuel supply and private-sector credit, reflected sluggish economic activity.

Dr Habibur said high borrowing costs, energy shortages, infrastructure constraints and uncertainty over domestic and external demand continued to weigh on economic recovery.

He said the banking sector remained another major challenge for effective monetary policy transmission.

The non-performing loan ratio reached 32.78 percent in June 2026, while private-sector credit growth stood at 4.75 percent in August, indicating that the earlier reduction in the policy rate had yet to translate into a significant increase in private-sector lending.

According to the deputy governor, liquidity conditions and money-market rates have improved, but banks have shown a greater preference for relatively safer government securities amid heightened credit risks.

He said monetary policy measures alone would not be sufficient to revive productive investment unless accompanied by structural reforms in the banking sector.

“Banking-sector restructuring, capital restoration, stronger governance and improved credit discipline are essential for strengthening monetary transmission,” he said.

Dr Habibur also highlighted Bangladesh Bank’s targeted support measures for the productive sectors.

He said a TK60,000 crore stimulus package has been deployed to support economic recovery, including TK20,000 crore specifically allocated for reopening closed industrial units and factories.

He said refinance facilities have also been strengthened for agriculture, cottage, micro, small and medium enterprises (CMSMEs) and export diversification.