After showing a downward trend for a month or two, inflation rose again in September, renewing concerns among consumers who have been severely affected by high prices over the past three years. Taming this persistent inflation has been one of the top priorities of the interim government. In pursuit of this goal, several measures have been implemented, including a tight monetary policy, a broad reduction in import duties and facilitation of the smooth settlement of letters of credit (LCs) for essential goods.
As a result, inflation has eased slightly, hovering around 8.5 per cent over the past couple of months, compared to the double-digit levels recorded a year earlier. Although the decline is modest and falls short of offering meaningful relief to consumers, even the slight improvement is under threat, which naturally raises concern. Bangladesh Bureau of Statistics (BBS) data show that point-to-point inflation actually increased in September compared to August.
In comparison, neighbouring countries have achieved more substantial reductions. Sri Lanka, for instance, brought down inflation to 1.5 per cent in September 2025 from around 16.5 per cent in 2023, while Pakistan saw a decline to 5.6 per cent in September 2025 from 31.4 per cent a year earlier.
This contrast raises a critical question: why has inflation in Bangladesh remained so persistent despite two years of tight monetary policy? Does this point to inconsistencies in other policy measures?
One example is Bangladesh Bank (BB)'s recent intervention in the banking sector. While striving to limit money supply through monetary tightening, BB provided Tk 520 billion to 12 weak banks by printing new money. The move surprised many, as the current BB governor had been a vocal critic of money printing by the previous government and had affirmed that he would not resort to such measures to bail out cash-strapped banks. However, the intervention was deemed necessary to ensure that depositors could recover their funds in the aftermath of systematic looting by the previous government and to protect the economy from the disrepute that would arise from bank failures.
That said, one may recall that inflation in Bangladesh had skyrocketed following the Russia-Ukraine war, which drove up global prices for fuel, food, and raw materials, coupled with a sharp depreciation of the taka against the dollar, all of which has increased the cost of import. In this sense, much of the country's inflation is imported. While global markets have since stabilised, the taka's exchange rate remains elevated, rising from around Tk 85 per dollar three years ago to over Tk 122 per dollar today. This depreciation has increased import costs, placing upward pressure on domestic prices.
However, unlike a year ago, there is currently no dollar crisis. On the contrary, BB has been on a dollar-buying spree, purchasing more than $2 billion from commercial banks over the past three months through 14 auctions, supported by stronger remittance and export inflows. This raises the question: Why is BB keeping the US dollar artificially steady? The likely objective is to support exporters and remitters. But what about consumers? Bangladesh is heavily reliant on imports for essential goods such as fuel, food, and industrial goods. Moreover, by keeping the dollar artificially high, the central bank risks undermining its own efforts to curb inflation.
When BB buys dollars from local banks, it injects additional taka liquidity into the financial system. This runs counter to the principles of a tight monetary policy, which seeks to reduce money supply and limit credit expansion to contain price pressures. Moreover, even a slight appreciation of the taka would help lower import costs. The central bank, therefore, may need to recalibrate its strategy to prioritise price stability alongside supporting exporters and remitters.
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