Staff Reporter :
The Bangladesh Bank announced on Wednesday that it has increased the policy rate by 50 basis points to 8.5%, as part of efforts to curb rising inflation.
During a press conference, the central bank disclosed this decision along with corresponding adjustments to the Standing Lending Facility (SLF) and Standing Deposit Facility (SDF) rates, aiming to stabilize inflation at a preferred level.
According to data from the Bangladesh Bureau of Statistics (BBS), point-to-point inflation in Bangladesh slightly rose to 9.81% in March compared to 9.67% in February. Overall inflation has remained above 9% since March of last year.
In December 2023, preceding the announcement of the monetary policy for the second half of the financial year in January, inflation stood at 9.41%. The Bangladesh Bank had previously raised the policy rate, with a 50 basis points increase to 7.75% at the beginning of October last year.
Subsequently, the policy rate was raised by 25 basis points to 8% in January this year.
This recent decision to hike rates comes less than a week after the formation of the new government. Prime Minister Sheikh Hasina emphasized that combating inflation is a top priority for her administration.
Zahid Hussain, former lead economist at the World Bank’s Dhaka office, stated that the central bank’s actions to raise policy and lending rates are primarily aimed at controlling inflation. However, he noted that it will take some time for these changes to have a noticeable impact on the market.
Hussain also mentioned that an increase in the policy rate will lead to higher fund costs for banks, which in turn could result in higher loan costs for customers.
This latest move by the Bangladesh Bank underscores ongoing efforts to address inflationary pressures in the country’s economy.