Bangladesh Bank (BB) on Tuesday increased the policy rate, also known as repo rate, again by 50 basis points to 9.50% to contain double-digit inflation.
The new rate will be effective from Wednesday (September 25), said a circular issued on the day.
This is the fourth hike this year and 11th since May 2022.
As a result, the interest rate of the money that the banks borrow from the central bank will increase.
Additionally, there will be a rise in the interest rate on bank loans and deposits.
Bankers said that due to the rate hike, the interest rate for any commercial bank facing a liquidity crisis will rise.
Also, loan interest rates for customers will increase.
Consequently, higher loan rates are expected to reduce consumer spending, which should help decrease inflation gradually.
As per the circular, the highest ceiling of policy rate corridor of standing lending facility (SLF) rate has been raised to 11% from 10.50% while the lowest limit of standing deposit facility (SDF) rate has been raised to 8% from 7.50%.
Earlier on Monday Bangladesh Bank Governor Ahsan H Mansur had hinted 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 keep inflation in check,” he added.
According to Bangladesh Bureau of Statistics (BBS) data, Consumer Price Inflation (CPI) climbed to 11.66% in July, the highest since FY11, following August at 10.49%, which was the second-biggest rise in the last 13 years.