On 22 January 2026, the Monetary Policy Committee (MPC) of Bangladesh Bank held its 11th meeting under the chairmanship of Dr. Ahsan H. Mansur. The meeting came at a critical time for the economy — inflation remains elevated, global uncertainties persist, and domestic demand pressures are building ahead of national elections and Ramadan.
The decisions taken in this meeting reflect a careful balancing act: controlling inflation without choking growth, stabilizing liquidity without discouraging credit flow, and maintaining exchange rate stability while pushing forward financial sector reforms.
Here’s a breakdown of what happened — and what it means for businesses, banks, investors, and ordinary citizens.
Attendees
The eleventh meeting of the Monetary Policy Committee (MPC) was held on 22 January, 2026, chaired by Dr. Ahsan H. Mansur, Governor of Bangladesh Bank (BB). The meeting was attended by the MPC members—
- Dr. Md. Habibur Rahman, Deputy Governor, Bangladesh Bank;
- Dr. Md. Akhtar Hossain, Chief Economist, Bangladesh Bank; Dr. Sadiq Ahmed, Economist;
- Dr. A.K. Enamul Haque, Director General, Bangladesh Institute of Development Studies (BIDS);
- Dr. Firdousi Naher, Chairman, Department of Economics, University of Dhaka;
- and Mr. Mahmud Salahuddin Naser, Executive Director, in charge of the Monetary Policy Department, Bangladesh Bank.
Additionally, Mr. Sadrul Hasan, Member Secretary of the MPC and Director (Current Charge), Monetary Policy Department, was also in attendance.
1. Inflation Still the Top Priority
The MPC made it clear: inflation control remains the central objective.
While Bangladesh Bank’s contractionary monetary stance has started producing results — including exchange rate stability, gradual recovery of foreign exchange reserves, and a positive real policy rate — inflation has not eased as quickly as expected.
Several demand-side risks are on the horizon:
- National election-related spending
- Ramadan-driven consumption surge
- Potential implementation of the 9th National Pay Scale
All of these could increase consumer spending and add inflationary pressure.
The central bank acknowledged that simply keeping interest rates high may not be enough. Inflation in Bangladesh is not purely monetary — food prices, supply chain inefficiencies, and trade rigidities play major roles.
2. Integrated Strategy for Inflation Control
One of the most important insights from this meeting is the recognition that inflation cannot be tackled by policy rate adjustments alone.
The MPC emphasized:
- Accurate estimation of food demand and domestic production
- Timely government food imports
- Better distribution management
- Trade policy responsiveness to global supply shocks
Despite global commodity prices falling, domestic prices have remained high. This suggests structural bottlenecks rather than purely demand-driven inflation.
This is a significant acknowledgment: monetary tightening alone cannot fix supply-side inflation.
Expect the upcoming Monetary Policy Statement (MPS) for the second half of FY26 to provide more clarity on why inflation has remained sticky despite contractionary policy.
3. Key Policy Decision: SDF Rate Cut by 50 Basis Points
The most actionable decision from the meeting:
- Policy rate remains at 10.0%
- Standing Lending Facility (SLF) remains at 11.5%
- Standing Deposit Facility (SDF) reduced from 8.0% to 7.5%
This is a targeted liquidity management adjustment.
Why Lower the SDF?
At the existing SDF rate, many banks were parking excess liquidity at the central bank instead of lending to:
- The interbank market
- The private sector
By lowering the SDF rate, Bangladesh Bank is making it less attractive for banks to passively hold funds with the central bank.
The objective:
- Encourage more active liquidity management
- Boost interbank transactions
- Support private sector credit flow
Importantly, the main policy rate was not cut. This signals that the central bank is not shifting toward easing — it is simply fine-tuning liquidity dynamics.
4. Positive Real Policy Rate: A Turning Point
For the first time in a long period, the real policy rate is firmly positive.
This matters because:
- It incentivizes savings
- It strengthens policy credibility
- It helps anchor inflation expectations
A positive real rate is essential for restoring macroeconomic stability after prolonged inflationary pressure.
This is a strong signal to markets that Bangladesh Bank is committed to maintaining discipline.
5. National Pay Commission and Fiscal Risks
A major risk highlighted in the meeting is the possible implementation of salary increases for public sector employees under the National Pay Commission 2025.
If the government raises salaries without significantly increasing revenue collection, it will have to rely on deficit financing.
That could lead to:
- Higher government borrowing
- Pressure on the money market
- Rising interest rates across the financial system
The MPC subtly but clearly indicated that fiscal discipline is crucial.
Monetary policy alone cannot maintain stability if fiscal expansion accelerates unchecked.
This shows coordination concerns between fiscal and monetary authorities — a key issue for macroeconomic sustainability.
6. Exchange Rate: Commitment to Market-Based System
The MPC reaffirmed the importance of maintaining a market-based exchange rate.
This is critical because:
- Artificial exchange rate controls distort markets
- Market-based pricing improves transparency
- It helps rebuild investor confidence
- It reduces speculative pressure
Exchange rate stability has already improved compared to previous volatility periods.
Continued commitment to flexibility suggests Bangladesh Bank does not intend to return to heavy administrative controls.
7. Banking Sector Challenges: NPLs and Liquidity Pressure
The meeting also addressed structural weaknesses in the banking sector.
Elevated non-performing loans (NPLs) continue to:
- Strain weaker banks
- Intensify liquidity pressure
- Reduce lending capacity
Bangladesh Bank has initiated a reform agenda aimed at:
- Strengthening governance
- Improving stability
- Enhancing integrity
- Rebuilding public confidence
These long-term reforms are essential. Monetary policy can stabilize inflation temporarily, but without financial sector strength, sustainable growth is impossible.
8. Why the Policy Rate Was Not Changed
Some market participants may have expected either a rate hike (to fight inflation) or a rate cut (to support growth).
Instead, the MPC chose stability.
Maintaining the policy rate at 10% suggests:
- Inflation is moderating gradually
- Further tightening is not immediately necessary
- Premature easing would be risky
This reflects a cautious and data-dependent approach.
9. What This Means for Different Stakeholders
For Banks
- Lower return on idle liquidity parked at Bangladesh Bank
- Greater incentive to lend or participate in the interbank market
- Continued high borrowing cost environment
For Businesses
- Borrowing rates remain elevated
- Credit flow may improve gradually
- Stability outlook improving
For Investors
- Continued high interest rate environment
- Gradual macro stabilization underway
- Currency volatility expected to remain contained
For Households
- Savings continue to be attractive
- Inflation still a concern, especially food prices
- No immediate relief in borrowing costs
10. Policy Outlook: Tight Until Inflation Falls
The MPC clearly stated that the current policy stance will continue until the desired level of inflation is achieved.
This is forward guidance.
It signals:
- No quick pivot toward easing
- Inflation remains the primary objective
- Stability before stimulus
Given election dynamics and possible fiscal expansion, monetary caution will likely remain through FY26.
Final Thoughts: A Strategic Fine-Tuning Phase
The 11th MPC meeting reflects a shift from aggressive tightening toward strategic fine-tuning.
Key takeaways:
- Inflation is moderating but not yet under control
- Policy rate unchanged — signaling stability
- SDF rate cut — encouraging liquidity circulation
- Fiscal risks acknowledged
- Banking sector reforms ongoing
- Market-based exchange rate reaffirmed
Bangladesh is currently in a delicate stabilization phase.
The central bank appears committed to maintaining discipline while gradually normalizing financial conditions.
The real test will be:
- How inflation behaves during Ramadan and election season
- Whether fiscal policy remains restrained
- Whether banking reforms gain momentum
If these align positively, macroeconomic stability could strengthen significantly in the second half of FY26.
For now, the message from the MPC is clear:
Caution, discipline, and calibrated action will guide monetary policy — until inflation is firmly under control.
