In a bid to tackle soaring inflation, Bangladesh Bank has announced another increase in the policy rate.
Effective next week, the rate will rise by 50 basis points from 9.50 per cent to 10 per cent, as confirmed in a notification issued by the central bank today, Tuesday (October 22).
This decision aligns with recommendations from the International Monetary Fund (IMF), as inflation in Bangladesh has remained above 9 per cent since March of last year.
The policy rate was last adjusted on September 24, when it was raised from 9 per cent to 9.5 per cent. This marks the third increase under the leadership of governor Dr Ahsan H Mansur, who initially raised the rate from 8.5 per cent to 9 per cent.
In its latest guidelines, Bangladesh Bank noted that the overnight repo policy interest rate has been revised to 10 per cent to maintain its contractionary monetary policy.
Additionally, to enhance liquidity management for banks, the upper limit of the Standing Lending Facility (SLF) has been raised by 50 basis points from 11 per cent to 11.50 per cent.
Meanwhile, the lower limit of the Standing Deposit Facility (SDF) has also been adjusted upward by 50 basis points, from 8 per cent to 8.50 per cent. These changes will take effect tomorrow, Wednesday (October 27).
According to data from the Bangladesh Bureau of Statistics (BBS), consumer price inflation surged to 11.66 per cent in July, with the 12-month average inflation standing at 9.73 per cent for the fiscal year 2023-24. This marks the highest inflation rate since FY 2010-11, significantly exceeding the previous government's target of 7.5 per cent.
Since May 2022, Bangladesh Bank has implemented contractionary measures to rein in prices, leading to a series of policy rate hikes. As a result, interest rates on bank loans have increased, making borrowing more expensive for consumers and businesses alike.