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Amid a record fall in the private sector credit demand, the Bangladesh Bank (BB) is set to unveil the monetary policy statement (MPS) for the first half (H1) of this financial year (FY26) today by setting the target to reduce inflation to 6.50 per cent.
Though the country has been experiencing an economic slowdown for more than a year because of several factors, including post-uprising political uncertainties, lawlessness, a severe energy crisis in the industrial belts, and exchange rate-related shocks, the central bank is likely to maintain the current monetary policy stance by keeping the policy rate unchanged at 10.0 per cent.
Central bank Governor Dr Ahsan H Mansur is expected to unveil the key half-yearly blueprint for the financial sector at a press conference scheduled for 3:00pm.
It will be his second MPS announcement since taking the leadership of the central bank after the changeover in state power following last year's July-August mass uprising.
Maintaining the previous stance would certainly bring no cheer for businesspeople, who have long been demanding the policy or repo rate be reduced further to create some sort of respite amid the prevailing slowdown and the higher non-performing loan (NPL) regime.
This MPS will be very special because some of the macroeconomic challenges started easing in recent times.
The inflationary burden on people continues to drop, standing at 8.48 per cent in June, down from May's count of 9.05 per cent because of the continuity of the central bank's monetary-tightening policy.
On the other hand, foreign exchange reserves rose significantly, driven by robust remittances, export inflows, and a shift to the market-driven exchange rate.
But the private sector credit growth has become a big concern as it dropped to a record low of 6.4 per cent in June, which was well below the monetary target of 9.8 per cent.
Seeking anonymity, a central bank official said the banking regulator has decided to keep the policy rate unchanged as the target to contain inflation has not been achieved yet.
Consequently, the standing deposit facility (SDF) and the standing liquidity facility (SLF) rate would remain at 8.0 per cent and 11.5 per cent, respectively, he said.
He also said the central bank made the decision after reviewing the current macroeconomic situation, challenges, and outlook from both domestic and global perspectives, projecting the private sector credit growth to reach 8.0 per cent by June 2026.
Responding to a question, he shared the central bank's current stance that the policy rate would be eased once inflation is brought down below 7.0 per cent.
Bangladesh Knitwear Manufacturers and Exporters Association (BKMEA) President Mohammad Hatem said the lending rate is one of the factors that has badly impacted business.
"It must be reduced for the sake of ease of doing business," he said.
Mr Hatem, also the managing director of MB Knit Fashion Ltd, said the central bank keeps the policy rate at 10 per cent, but commercial banks are charging as high as 16 per cent for the lending rate.
"We cannot absorb the burden because it is too heavy for us amid the current economic slowdown," he said. Entrepreneurs mostly suspended their business expansion plans due to some factors, and higher interest rate is one of them, he added.
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