Dhaka, Bangladesh – November 18, 2025 – The Bangladesh Bank has reaffirmed its steadfast commitment to combating persistent inflation by holding its key policy rate, the repo rate, at a robust 10%. This decision, most recently reiterated on November 3, 2025, signals the central bank's unwavering focus on price stability, even as it navigates calls for economic stimulus from the business community. The move is a continuation of a contractionary monetary policy initiated in late 2024, designed to anchor inflation firmly below the 7% mark.
This sustained hawkish stance comes at a critical juncture for Bangladesh's economy. While headline inflation has shown signs of easing, dipping to 8.17% in October 2025 from 8.36% in September, it remains significantly above the central bank's comfort zone. The decision underscores the Bangladesh Bank's prioritization of long-term economic health through price stability over short-term growth impulses, setting the stage for a period of cautious monetary management.
A Calculated Stand: Bangladesh Bank's Battle Against Rising Prices
The journey to the current 10% policy rate began with a significant 50 basis point hike on October 27, 2024, pushing the repo rate to its current level. This initial increase was a decisive step to address escalating inflationary pressures. Since then, the Bangladesh Bank has consistently maintained this rate through subsequent Monetary Policy Statements (MPS) and committee meetings. Key decisions to hold the rate were announced on February 10, 2025, for the second half of FY2024-25, and again on July 31, 2025, for the first half of FY2025-26, culminating in the latest reaffirmation on November 3, 2025, by the Monetary Policy Committee (MPC).
The primary architect of this strategy, Bangladesh Bank Governor Dr. Ahsan H. Mansur, has been unequivocal in his messaging. He has repeatedly stated that the repo rate will remain at 10% until inflation is "firmly and permanently anchored below 7 per cent," emphasizing that "Our primary mandate is price stability." This resolute stance acknowledges the business community's desire for lower rates to spur investment and credit expansion. However, Governor Mansur has cautioned against "premature easing [that] could risk reigniting inflation," asserting that the central bank's approach is "data-driven and forward-looking." The objective is clear: to significantly reduce inflation from its elevated levels and safeguard macro-financial and price stability. The latest data shows core inflation, a key indicator for monetary policy, significantly decreased to 6.19% at the end of September 2025, offering a glimmer of hope, yet overall inflation remains a concern.
Navigating the Economic Currents: Potential Winners and Losers
The Bangladesh Bank's decision to maintain a high policy rate at 10% will inevitably create distinct winners and losers within the economy.
Potential Winners:
- Savers and Fixed-Income Investors: Individuals and institutions holding deposits or investing in fixed-income instruments are likely to benefit from higher interest rates. Commercial banks, compelled to offer competitive rates to attract deposits, will pass on some of the benefits of the elevated policy rate, providing a more attractive return on savings.
- Banks (with caveats): While higher policy rates generally translate to higher lending rates, potentially boosting Net Interest Margins (NIMs) for commercial banks, this is contingent on their ability to manage Non-Performing Loans (NPLs) and maintain credit demand. Banks with robust asset quality and efficient operations, such as Eastern Bank Ltd. (EBL:DSE) or BRAC Bank Ltd. (BRACBANK:DSE), might find opportunities, but they must also contend with the risk of reduced loan demand due to higher borrowing costs.
- Export-Oriented Industries: A stable or strengthening Taka, indirectly supported by a tight monetary policy that attracts foreign capital and curbs import demand, could benefit exporters by making their goods more competitive in international markets. Companies like Beximco Pharmaceuticals Ltd. (BEXPHAR:DSE) or textile manufacturers could see an advantage if currency stability is maintained.
Potential Losers:
- Borrowers and Businesses Relying on Credit: Companies and individuals seeking loans for expansion, working capital, or consumption will face higher borrowing costs. This can stifle investment, reduce profitability, and slow down growth, particularly for Small and Medium-sized Enterprises (SMEs) that are more sensitive to interest rate fluctuations. Sectors like manufacturing, construction, and real estate, which typically rely heavily on credit, could experience significant headwinds.
- Consumers: Higher interest rates can translate to increased costs for consumer loans, mortgages, and credit card debt, potentially dampening consumer spending and overall demand.
- Government: The government's borrowing costs will also increase, impacting its budget and potentially limiting its ability to fund public projects or social welfare programs.
Broader Implications: A Global Trend and Local Challenges
The Bangladesh Bank's sustained anti-inflationary stance is not an isolated event but rather reflects a broader global trend where central banks worldwide have been grappling with elevated inflation in the post-pandemic era. Many economies, both developed and emerging, have seen their central banks tighten monetary policy aggressively to restore price stability. This fits into the narrative of central banks prioritizing their core mandate of inflation control, often at the expense of immediate economic growth.
The ripple effects of this decision are multifaceted. Domestically, higher interest rates are designed to cool aggregate demand, thereby reducing inflationary pressures. However, this also poses challenges for economic growth, which eased to 3.97% in FY2025, down from 5.82% in FY2024. The central bank is walking a tightrope, aiming to achieve a soft landing rather than triggering a sharp economic slowdown. Internationally, maintaining a tight monetary policy can help stabilize the Taka against major currencies, potentially aiding in managing import costs and bolstering foreign exchange reserves, which stood at USD 32.33 billion in October 2025. This stability is crucial for investor confidence and managing external debt.
Regulatory and policy implications include a reinforcement of the Bangladesh Bank's independence and its commitment to data-driven decision-making. The sustained high rate also signals a more disciplined approach to monetary policy, potentially moving away from past periods where growth was often prioritized over inflation control. Historically, prolonged periods of high inflation have eroded purchasing power and economic stability in Bangladesh, making the current policy a direct response to these past challenges. Comparisons can be drawn to other emerging markets that have endured similar inflationary battles, where consistent monetary tightening eventually brought prices under control, albeit sometimes with a temporary cost to economic expansion.
What Comes Next: A Path Forward Amidst Uncertainty
Looking ahead, the immediate future for Bangladesh's economy will largely hinge on the trajectory of inflation. The Bangladesh Bank has explicitly tied its policy rate to the inflation target, suggesting that any significant easing will only occur once inflation is "firmly and permanently anchored below 7 per cent."
Short-term possibilities: Expect continued vigilance from the central bank. The 10% policy rate is likely to remain in place for the foreseeable future, at least through the first half of 2026, as the central bank monitors inflation data, foreign exchange reserves, and global economic conditions. Businesses will need to adapt to higher borrowing costs, potentially leading to a slowdown in new investments and a focus on operational efficiency.
Long-term possibilities: If the contractionary policy successfully brings inflation down, the Bangladesh Bank could gradually begin to ease rates, providing much-needed stimulus to the economy. This would create opportunities for renewed credit expansion and investment. However, a premature easing could risk reigniting inflationary pressures, forcing the central bank into another tightening cycle.
Market opportunities and challenges: Challenges will persist for sectors heavily reliant on domestic credit and consumer spending. However, opportunities may emerge for companies with strong balance sheets, those in export-oriented sectors, or those that can innovate to reduce costs and enhance productivity. Investors might shift towards more defensive stocks or those with stable cash flows.
Potential scenarios and outcomes:
- Scenario 1 (Optimistic): Inflation continues its downward trend, consistently falling below 7%. The Bangladesh Bank, confident in its progress, begins a gradual reduction in the policy rate in late 2026 or early 2027, stimulating economic growth without reigniting inflation.
- Scenario 2 (Neutral): Inflation hovers stubbornly around the 7-8% mark. The central bank maintains the 10% policy rate for an extended period, leading to slower but more stable economic growth as businesses and consumers adjust to the 'new normal' of higher interest rates.
- Scenario 3 (Pessimistic): Global commodity prices rise again, or domestic supply shocks lead to a resurgence in inflation. The Bangladesh Bank might be forced to consider further tightening, putting significant pressure on economic growth and financial stability.
Comprehensive Wrap-up: Sustained Stability as the Goal
The Bangladesh Bank's resolute decision to hold its policy rate at 10% is a clear testament to its unwavering commitment to achieving price stability. The central bank's primary objective is to bring inflation under control, a goal it views as fundamental to the long-term health and stability of the Bangladeshi economy. While this contractionary stance may present immediate challenges for economic growth and credit-dependent sectors, it is a calculated move to prevent entrenched inflation from eroding purchasing power and investor confidence.
Moving forward, the market will be closely watching several key indicators. Foremost among these will be monthly inflation reports, particularly the core inflation figures, which will guide the central bank's future policy decisions. Developments in foreign exchange reserves, global commodity prices, and the Taka's stability will also be critical. Investors should pay close attention to the Bangladesh Bank's Monetary Policy Statements and any pronouncements from Governor Mansur, as these will provide crucial insights into the central bank's assessment of the economic landscape and its future policy direction. The current period demands patience and strategic adaptation from all stakeholders, as Bangladesh navigates its path towards sustained economic stability.
This content is intended for informational purposes only and is not financial advice