Bangladesh Bank Keeps Policy Rate Unchanged At 9.5% To Monitor Fuel Price Hike Impact

Dhaka, September 23, 2026 — Bangladesh Bank has decided to keep its policy interest rate unchanged at 9.5 per cent to closely monitor the economic impacts of recent domestic and international shocks, including volatile global energy prices and the domestic fuel price hike announced on 20 September. The decision was taken at the 14th meeting of the Monetary Policy Committee (MPC) held at the central bank's head office in Dhaka today.

🏦 The meeting was chaired by Bangladesh Bank Governor Mostaqur Rahman. At the meeting, the MPC reviewed recent domestic and global macroeconomic developments and noted a downward trend in headline inflation. However, inflation remains above the government's target ceiling of 7.50 per cent for fiscal year 2026-27.

📋 Why BB Held Rates Steady

The committee identified several risks that could put renewed pressure on inflation. These include:

• 🌏 Prolonged conflicts in the Middle East — which have kept global energy markets volatile.
• 🌏 The government's recent increase in domestic fuel prices — diesel, octane, petrol and kerosene up Tk 20 per litre.
• 🌏 The implementation of a new national pay scale — which could add to inflationary pressures.

Against this backdrop, the central bank opted for a cautious approach, deciding to assess how the domestic and international shocks affect Bangladesh's economy before making any changes to the existing policy rate. The MPC will particularly monitor their impact on gross domestic product (GDP) growth and consumer price inflation.

🏦 MPC Members

The meeting was attended by:

• 👥 Dr Habibur Rahman, Deputy Governor, Bangladesh Bank
• 👥 Dr Mustafa Kamal Mujeri, economist and former Director General of BIDS
• 👥 Dr AK Enamul Haque, Director General, Bangladesh Institute of Development Studies (BIDS)
• 👥 Dr Firdousi Naher, Chairperson, Dhaka University Economics Department
• 👥 Dr Imam Abu Sayed, Executive Director, Monetary Policy Department (MPD)

📊 Inflation And Growth Backdrop

The MPC's decision reflects the difficult balancing act Bangladesh Bank is currently navigating. The central bank faces conflicting pressures:

• 📈 Inflation pressure — the September 20 fuel price hike is expected to push headline inflation back up, after it had eased to 8.7 per cent in FY26 from 10.0 per cent in FY25.
• 📈 Growth pressure — the Asian Development Bank (ADB) just lowered Bangladesh's FY27 growth forecast to 4.0 per cent, well below the government's 6.5 per cent target.
• 📈 Banking sector stress — private-sector credit growth has stayed below 5 per cent for the fifth straight month.
• 📈 External sector strain — foreign exchange reserves have drifted downward, the current account deficit is projected to widen, and the taka remains under pressure.

The decision to hold rates steady — rather than cutting to support growth or hiking to defend the taka — signals that the MPC is unwilling to commit to a directional shift until the inflation and growth picture becomes clearer in the coming months.

💼 Context: Previous Rate Cut

Bangladesh Bank had previously cut the policy rate by 50 basis points after two years of hold-steady policy — a move that had signalled a tentative shift towards supporting growth. The earlier cut had brought the policy rate down from 10.0 per cent to 9.5 per cent, and had been welcomed by industry bodies including the Federation of Bangladesh Chambers of Commerce and Industry (FBCCI), BGMEA and BKMEA as a step towards easing borrowing costs for businesses.

However, with the fuel price hike set to add to inflation pressure, and with the new pay scale implementation due to widen fiscal spending from October, the MPC's cautious hold suggests that any further rate cuts will be deferred until early 2027 at the earliest.

🏛 What This Means For Bangladesh's Banking Sector

The rate hold has direct implications for the banking sector:

• 🏦 Lending rates will remain at current elevated levels — continuing to constrain private-sector credit growth.
• 🏦 Deposit rates will remain around 7-8 per cent — insufficient to attract significant new deposits in real terms given the inflation gap.
• 🏦 Bank profitability — the rate hold benefits banks' net interest margins, providing some relief to a sector under stress.
• 🏦 Treasury bill yields — likely to remain stable, supporting the government's borrowing programme.

💼 Industry Reaction

The decision drew mixed reactions from industry bodies and economists. The FBCCI, BGMEA and BKMEA had been hoping for another rate cut to ease borrowing costs for businesses — particularly in the RMG sector, where factories have been hit by energy shortages, order cancellations, and rising fuel costs.

However, economists at the Centre for Policy Dialogue (CPD) and the Policy Research Institute (PRI) had publicly warned against further rate cuts while inflation remained elevated and external sector pressures persisted. Their argument: a rate cut at this moment would risk fuelling further inflation without delivering significant growth benefits, given that private-sector credit growth is constrained more by demand-side factors than by the cost of borrowing.

The MPC's decision suggests it leaned towards the economists' caution rather than the industry demand for further easing.

🌏 Global Context

The Bangladesh Bank's decision comes amid a challenging global monetary policy environment. Major central banks are themselves navigating conflicting pressures:

• 🇺🇸 US Federal Reserve — has raised rates to tackle “too high” inflation, defying political pressure for cuts.
• 🇬🇧 Bank of England — maintaining a cautious hold amid persistent services inflation.
• 🇪🇺 European Central Bank — began cutting rates in 2025 but slowed the pace in 2026.
• 🇯🇵 Bank of Japan — maintaining ultra-low rates despite yen depreciation pressure.

For Bangladesh, the global rate environment is a constraint: cutting rates significantly below US Federal Reserve rates would risk accelerating capital outflows and putting further pressure on the taka. The 9.5 per cent policy rate is already modestly above the US Fed funds rate — a gap that helps defend the taka but raises borrowing costs for Bangladeshi businesses.

🏛 Wider Implications For Bangladesh's Economy

For Bangladesh's broader economy, the rate hold signals that the central bank is prioritising inflation management over growth support in the current quarter. This is a defensible position given the multiple shocks the economy is facing — but it also means that businesses will continue to face elevated borrowing costs through the rest of FY27.

The MPC's next review meeting will likely be in early December 2026, where it will have access to:

• 📈 October 2026 inflation data — showing the actual impact of the fuel price hike.
• 📈 Q2 FY27 GDP growth figures — indicating whether the slowdown is deepening.
• 📈 Updated remittance and reserve data — showing external sector trajectory.
• 📈 IMF programme review outcomes — expected in October 2026.
• 📈 Federal Reserve decisions — particularly any rate moves in November or December.

For now, Bangladesh's monetary policy stance is firmly on hold — waiting for clarity on the multiple shocks that have defined the economic environment of late 2026. Whether the next move is a cut or a hold will depend on whether inflation shows signs of moderating after the fuel price shock passes through, and whether growth shows signs of recovering from the current 4.0 per cent trajectory projected by the ADB.