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Bangladesh Bank is set to announce a new monetary policy on Wednesday, September 30, marking the third policy announcement this year and the first under a quarterly framework.
The move will mark a major shift in the central bank’s monetary policy regime, with Bangladesh set to begin announcing monetary policy four times a year from next year, instead of the previous six-monthly or annual schedule.
The latest policy is expected to keep the key policy interest rate unchanged, while the central bank may signal greater flexibility in the exchange rate and adjust interest rates on various refinancing and pre-financing schemes, officials said.
The move comes amid continued pressure to contain inflation and maintain economic stability. Inflation remains above Bangladesh Bank’s target of 7.5 per cent, while private-sector credit growth has weakened and excess liquidity in the banking sector has increased.
Higher fuel prices and a new wage structure have also added fresh inflationary pressure, limiting the scope for major changes in the monetary stance.
Bangladesh Bank’s monetary policy review shows that the country announced monetary policy once a year from 1972 to 2005. The central bank moved to a twice-yearly system in 2006, which continued until June 2019.
Monetary policy was announced once a year during the 2019-20, 2020-21 and 2021-22 fiscal years. The twice-yearly system was restored in July 2022.
Officials said the International Monetary Fund (IMF) has been pushing Bangladesh towards more frequent monetary policy reviews. The quarterly framework is expected to allow the central bank to respond more quickly to changes in inflation, exchange rates and global economic conditions.
Fahmida Khatun, distinguished fellow at the Centre for Policy Dialogue (CPD), said reviewing monetary policy every three months instead of six months was timely.
“Regular reviews will create opportunities to respond to rapid changes in inflation, exchange rates and the global situation,” she said.
However, she said the framework would require reliable data, accurate forecasts and strong analytical capacity. The central bank would also need to clearly communicate the reasons behind policy decisions and its inflation and growth forecasts.
Khatun noted that supply-driven inflation, particularly from food and fuel, could not be controlled through interest rates alone and would require coordination with other government policies.
In July, Bangladesh Bank cut its policy rate for the first time in nearly six years, lowering it to 9.5 per cent from 10 per cent. It also reduced the Standing Lending Facility (SLF) rate to 11 per cent from 11.5 per cent, while keeping the Standing Deposit Facility (SDF) rate unchanged at 7.5 per cent.
At its September meeting, the Monetary Policy Committee decided to keep the policy rate unchanged, citing continued inflationary pressures and domestic and global risks.
According to Bangladesh Bureau of Statistics data, point-to-point inflation eased slightly to 8.26 per cent in August from 8.32 per cent in July. However, it remained well above the government’s 7.5 per cent target.
The 12-month moving average inflation rate also stood at 8.66 per cent in August.
Bangladesh Bank spokesperson and Executive Director Arif Hossain Khan said the quarterly framework would allow the central bank to analyse market and economic conditions more frequently and take policy measures when necessary.
“Considering the overall situation of the country, monetary policy is being announced on a quarterly basis,” he said.
