The continuation of a tight monetary policy by keeping the policy rate unchanged at 10 percent could lead to higher production costs, public-private dialogue platform Business Initiative Leading Development (BUILD) said yesterday.

The platform's reaction came after the Bangladesh Bank (BB) unveiled the monetary policy for January-June this year, maintaining the key policy rate to curb inflation, which has remained above 9 percent for the 23rd consecutive month since March 2023.

The repeated hikes in the policy rate have pushed up interest rates, making loans costlier for businesses.

BUILD stated that the contractionary policy is increasing the cost of importing raw materials, raising wages, and driving up machinery expenses, thereby inducing policy-driven inflation that contradicts the strategy to reduce inflation.

It noted that a high policy rate alone cannot contain inflation. Other factors, such as supply-side constraints, also influence inflation.

"BB should consider these factors to ensure perfect competition in the economy along with good governance through a coordinated effort," it said.

BUILD reported that its study found a lack of discipline in the supply side.

"There is a dominance of extortionists at the field level," it said, adding that only eight to nine entities control the supply of imported consumer goods, creating an oligopolistic market structure.

"Coordination among the National Board of Revenue (NBR), law enforcement agencies, and the BB needs to be strengthened. The role of the Bangladesh Competition Commission is not visible in addressing market anomalies."

Citing how three task forces formed for the banking sector, BUILD said the initiatives are part of a broader plan to stabilise the economy and reform the banking sector. However, a specific timeline could provide a sense of hope for discipline in the banking and financial sector.

The platform stated that the monetary policy statement for the January-June period of FY25 primarily focuses on governance issues related to stabilising the money market.

It also pointed out that the monetary policy does not clarify any new stance on how to leverage global economic growth to support Bangladesh's exports and remittances.