Business | Opinion

When monetary policy cannot fully transmit

Bangladesh Bank's latest Monetary Policy Statement (MPS) leaves the policy rate unchanged at 10 percent, reaffirming its “contractionary” stance to bring inflation under control. The decision comes after nearly two years of monetary tightening, during which private sector credit growth slowed to around 5 percent in May, one of the lowest rates in de

When monetary policy cannot fully transmit

By Admin User

Jul 1, 2026 - 1 min read

Bangladesh Bank's latest Monetary Policy Statement (MPS) leaves the policy rate unchanged at 10 percent, reaffirming its “contractionary” stance to bring inflation under control. The decision comes after nearly two years of monetary tightening, during which private sector credit growth slowed to around 5 percent in May, one of the lowest rates in decades.

<div>This apparent disconnect has fuelled a growing argument among business leaders and even some economists: if inflation has remained close to double digits despite a collapse in private credit growth, doesn't that prove contractionary monetary policy has failed?</div><div><br></div><div>It is a legitimate question. But it points to the wrong conclusion.</div>

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