The central bank today said Bangladesh's economy has begun to rebound though inflation has remained stubbornly high.  

The current trends in inflation, monetary aggregates, liquidity, interest rates, foreign exchange reserves, and exchange rate developments were reviewed following three major recent policy decisions: the introduction of a crawling peg system with a market-driven mid-rate, the removal of the interest rate cap under SMART, and the increase in policy rates.  

The crawling peg system has stabilised the exchange rate and contributed to building foreign exchange reserves. Amid tight liquidity conditions, all interest rates—including those in the money market, deposits, lending, and yields on Treasury bills and bonds—have increased substantially, indicating effective policy transmission.  

Most monetary aggregates have followed the projected paths, said the BB in the monetary policy statement today. "The monetary policy committee noted that the economy has begun to rebound."  According to the central bank, while the upward trend in inflation has moderated recently, it remains stubbornly high.

"After careful review, the MPC concluded that the current monetary policy tightening stance should be maintained until inflation reaches a tolerable level. Inflation control remains a top priority for Bangladesh Bank."

The BB has maintained a contractionary monetary policy for over a year, significantly increasing the policy rate and avoiding new high-powered money issuance for government spending.  The government supports these efforts by reducing tariffs on selected commodities, expanding social protection schemes like open market sales, and introducing the Family Card.

The BB has also instructed banks to maintain minimum cash margins on import letters of credit for essential, high-demand products.  Despite some moderation, CPI inflation remained above 9 percent throughout the second half of the last fiscal year, which ended on June 30.

"However, coordinated policy initiatives and global commodity price temperance are expected to continue reducing CPI inflation in the coming months," the BB said.  The BB aims to bring down inflation to around 6.5 percent at the end of FY25.