Controlling inflation is not possible simply by raising interest rates, Bangladesh Bank Governor Mostaqur Rahman has said, emphasising the need for coordinated efforts involving market management, supply systems, and fiscal policy.
Speaking during the question-and-answer session after announcing the monetary policy for the first half of the 2026-27 fiscal year on Tuesday, the governor said, “Monetary policy alone is not sufficient to tackle inflation or any kind of crisis. Other supportive policies must also work equally.”
He stressed the need to improve market management to prevent extortion, unjustified hoarding, and market manipulation through syndicates. At the same time, the central bank will continue to use its monetary policy tools to control inflation.
The governor acknowledged that inflation has not yet come down to a comfortable level, but noted it has decreased compared to before, with tight monetary policy playing a role in that process.
“We cannot say that monetary policy is not working to bring down inflation,” he said.
The Bangladesh Bank kept the policy repo rate unchanged at 10 per cent for the third consecutive time, maintaining the Standing Lending Facility at 11.5 per cent and the Standing Deposit Facility at 7.5 per cent.
Deputy Governor Habibur Rahman said inflation had risen to nearly 12 per cent in mid-2024 but has since decreased. However, both food and core inflation remain a concern.
According to the central bank’s assessment, current inflation is driven by excess demand, energy supply uncertainties, global geopolitical tensions, supply chain disruptions, and structural market weaknesses.
However, the high policy interest rate has at least prevented inflation from rising further and has helped stabilise the exchange rate. “When local money becomes expensive, the tendency for excessive speculation on the exchange rate also decreases,” the governor said.
Alongside controlling inflation, the central bank has announced a targeted incentive programme of Tk60,000 crore to revitalise the economy, with funds directed to productive sectors rather than consumption.
“The stimulus package funds will go to production, not consumption. So, it will also play a supportive role in reducing inflation,” the governor added.
