The Bangladesh Bank (BB) expects exchange rates to remain stable, supported by significant improvements in the balance of payments (BoP), according to the monetary policy unveiled today.

This stability is anticipated to curb volatility in domestic commodity prices and bolster overall economic resilience.

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Economy poised to encounter substantial hurdles in H2 of FY25: BB

BB remains optimistic about the continued strengthening of the BoP, driven by rising remittance inflows and promising export prospects.

These factors are expected to further support efforts to maintain price stability, the central bank stated.

However, the sharp depreciation of the Taka against the US dollar has been a key driver of inflation.

Since 2022, the local currency has depreciated by over 30 percent, amplifying inflation through exchange rate pass-through effects. Even as global commodity prices stabilised after 2023, domestic prices have remained elevated due to the Taka's depreciation.

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Economic outlook for FY25 not very optimistic: BB

BB noted that persistent supply chain disruptions and inefficiencies have exacerbated inflationary pressures. Factors such as the lingering impact of the Covid-19 pandemic, the Russia-Ukraine war, energy price adjustments, market distortions, and the twin floods of August-September 2024 have further worsened the situation.

To restore macroeconomic stability, BB raised the policy rate by 1.5 percentage points between August and October 2024, reflecting a policy shift under the interim government.