Bangladesh Bank Maintains 10 Percent Rate Amid High Inflation

The Bangladesh Bank maintained its policy rate at 10 percent for the July-December period of the 2026-27 financial year to combat persistent inflation. The central bank has held the repo rate at this level since October 2024. Despite headline inflation decreasing from 11.7 percent in July 2024 to 9.42 percent in May 2026, the 12-month average of 8.63 percent indicates that inflation will likely exceed the bank's 7 percent target for June.

For the upcoming 2026-27 financial year, the central bank established an inflation ceiling of 7.5 percent and a GDP growth target of 6.5 percent. Bank officials attribute the stubborn inflation to global conflicts, volatile commodity prices, and a 40 percent depreciation of the taka against the US dollar. Domestic pressures include fuel price hikes and supply disruptions caused by recurrent floods.

Economists point to a failure in policy coordination. The government of Bangladesh increased net borrowing from the banking system to Tk 1,04,410 crore between July and April of FY26 to finance budget deficits, while the central bank provided Tk 75,903 crore in emergency liquidity assistance to banks. These factors, combined with high non-performing loans and structural inefficiencies, have hindered the effectiveness of contractionary monetary policy.