Bangladesh Bank hikes policy rate by 25 basis points to tame inflation

17 Jan '23

2 min read

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The Bangladesh Bank (BB), which recently unveiled its new monetary policy for the second half (H2) of the current fiscal, raised the policy rate by 25 basis points to 6 per cent to rein in inflation by making money more expensive for banks. The central bank would pursue a cautiously accommodative stance to contain inflationary and exchange rate pressures.

It raised the reverse repo rate as well by 25 basis points to 4.25 per cent.

Private sector credit growth was kept unchanged to 14.1 per cent under the new policy, while the public credit growth ceiling was raised to 37.7 per cent for June from the previous ceiling of 36 per cent.

This is for the fourth straight time that the bank increased interest rate as inflation remains high after surging to 9.5 per cent in September. The inflation target has been reset at 7.5 per cent for the current fiscal from the earlier target of 5.6 per cent set in June last year, according to Bangladeshi media reports.

Lending rate cap has also been relaxed for consumer loans, allowing banks to hike the consumer level interest rate by up to 3 percentage points.

The central bank has also removed the deposit floor rate considering current market conditions.

Terming the country's near-term economic outlook ‘quite stable’, the central bank said it depends on three external issues: the length and intensity of the Russia-Ukraine war, the spree of interest hikes by the US Federal Reserve and the re-emergence of the COVID-19 situation and its severity in China.

Fibre2Fashion News Desk (DS)

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