In a move to counter rising inflation, Bangladesh Bank on Tuesday raised the policy rate by 50 basis points, increasing it from 9% to 9.5%.
Bangladesh Bank Governor Ahsan H Mansur had hinted on Monday that the central bank would raise the policy rate twice within the next month to curb inflation. "A contractionary monetary policy will be followed until inflation comes under control. The policy rate will be hiked once this week and again next month," Mansur said during a briefing.
"I am optimistic that inflation will stabilize by March or April. While we cannot predict the exact level, we will continue tightening policies to reduce inflation. The stable exchange rate and rising remittances should help in keeping inflation in check," he added.
Under the new guidelines, the overnight repo policy interest rate has been increased to 9.5%, up 50 basis points from the previous 9%.
To improve bank liquidity management, the upper limit of the policy interest corridor for the Standing Lending Facility (SLF) has also been raised by 50 basis points to 11%, from 10.5%.
The floor of the Standing Deposit Facility (SDF) has been revised to 8% from 7.5%. These changes will take effect on Wednesday (September 25).
According to Bangladesh Bureau of Statistics (BBS) data, consumer price inflation climbed to 11.66% in July, the highest since FY 2010-11, following an average inflation rate of 9.73% for the fiscal year 2023-24.
The government had initially set an inflation target of 7.5% for the last fiscal year, but actual inflation far exceeded that goal.