Bangladesh Bank has signaled another round of increase in policy rate to combat high inflation.
On Tuesday (October 22), the central bank raised the policy rate by another 50 basis points from the existing 9.50 percent to 10 percent.
Bangladesh Bank has already issued a notification in this regard. Which will be effective from the beginning of next week.
The policy rate has been hiked since March last year in line with the advice of the International Monetary Fund (IMF) as the country’s inflation is over 9 percent. On September 24, the central bank raised the policy interest rate by 50 basis points from 9 percent to 9.5 percent. Dr. After Ahsan H. Mansoor took office as the governor of Bangladesh Bank, this policy interest rate was increased for the third time. For the first time, the central bank’s policy rate was increased from 8.5 to 9 percent.
In the new guidelines, Bangladesh Bank said, in view of the decision to continue the contractionary measures followed by Bangladesh Bank, the overnight repo policy interest rate has been revised to 10 percent by increasing 50 basis points from the existing 9.50 percent.
Besides, in order to manage the liquidity management of the banks more efficiently, the upper limit of the policy interest corridor has been increased to 11.50 percent from the existing interest rate of 11 percent to 11.50 percent. And the floor of the standing deposit facility (SDF) under the policy interest corridor has been revised up to 8.50 per cent from 8 per cent by 50 basis points. The new decision will be effective from Wednesday (October 23).
According to BBS data, consumer price inflation rose to 11.66 percent in July this year after the 12-month average inflation stood at 9.73 percent in the fiscal year 2023-24. This is the highest since FY 2010-11. The previous government had set an inflation target of 7.5 percent in the last financial year. Although inflation was much higher than the target in the country.
On the other hand, Bangladesh Bank has been following contractionary policy several times since May 2022 to keep prices under control. Policy rates are increasing. Bank loan interest increased due to increase in policy interest rate. This makes borrowing more expensive than ever.
