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to run unchecked.”

BMI also said falling long-term borrowing costs are another reason to keep the policy rate high. The 10-year treasury yield has trended down since January 2025, even though the policy rate remains elevated.

“Over the same period, credit growth has surged, driven by higher government borrowing. Apart from fuelling inflation, looser credit could also shift financial flows towards lower-quality investments. This is likely given the fragility of Bangladesh’s banking sector,” it said.

The report also noted the government’s request for $3 billion in financial support from the IMF and the World Bank.

“The government’s spending needs are real. Aside from cushioning the impact of the Iran conflict on Bangladeshi households, Dhaka will likely have to recapitalise several banks as it reforms the financial sector,” it said.

It added that IMF support is likely to depend on the government maintaining a degree of macroeconomic stability.

“Keeping monetary policy tight when economic conditions support it would help preserve confidence among international investors in Bangladesh’s medium-term prospects,” it said.