Bangladesh Bank increased 'policy interest rate' again to control inflation
September 24, 20243 Mins Read
Bangladesh BankOwn Correspondent: Bangladesh Bank has increased the policy interest rate again to control inflation. The governor had earlier hinted at raising the policy rate.

Today (September 24), the central bank has issued a notification resetting the policy interest rate by 50 basis points to 9.50 percent from the existing 9 percent.

The new decision will be effective from tomorrow, Wednesday (September 25).

The rate at which the central bank lends to scheduled banks for short periods is the policy rate. In English it is called repo rate. Repo Bangla is Repurchase Agreement (Repurchase Agreement or Repurchase Option). It is known as one of the tools of monetary policy to control inflation.

In a press conference yesterday afternoon, the Governor of Bangladesh Bank informed about increasing the policy interest rate. Ahsan H. Mansoor. It was extended for the second time after the governor assumed office. Earlier it was increased from 8 and a half to 9 percent.

The Governor of Bangladesh Bank said that the policy interest rate will be increased this week. Then there will be some more increments in the coming months. Now the policy rate is at 9 percent. The policy rate hike was in line with the advice of the International Monetary Fund (IMF) as the country's inflation has been above 9 percent since March last year.

Bangladesh Bank said, in view of the decision to continue the contractionary measures followed by Bangladesh Bank, the overnight repo policy rate has been revised by 50 basis points from the existing 9 percent to 9.50 percent.

The governor said, I am optimistic that inflation will come to a better place by March-April. It may not be possible to say how many good places will come. But we will tighten policy so that inflation comes down. We now have a stable exchange rate. Besides, remittances are also increasing. Hopefully the exchange rate will remain stable in the future. If this can be sustained then inflation will surely come down.

Besides, in order to manage the liquidity management of banks more efficiently, the upper limit of policy interest corridor
has been increased by 50 basis points to 11 percent from the existing interest rate of 10.50 percent in respect of Standing Lending Facility (SLF). And the lower limit of the standing deposit facility (SDF) of the policy interest corridor has been revised to 8 per cent by 50 basis points from 7.50 per cent.

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.

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