BB hikes policy rates to tame inflation

Staff Reporter :
Bangladesh Bank (BB) has increased the policy repo rate by 25 basis points to 6 per cent making money loans expensive.
It (BB) also hiked the reverse repo rate by 25 basis points to 4.25 per cent, while unveiling its new monetary policy for the second half of the current fiscal year (2022-23).
This is for the fourth straight time that the central bank increased interest rate as inflation remains high after surging to 9.5 per cent in September.
Besides, the 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.
BB, the central bank of Bangladesh, in its monetary policy stated that it would pursue a cautiously accommodative policy stance in the second half of the current fiscal year to contain inflationary and exchange rate pressures.
In the new monetary policy, private sector credit growth was kept unchanged at 14.1 per cent while the public sector credit growth ceiling increased to 37.7 per cent for June from the previous ceiling of 36 per cent.
The monetary policy, which was released through a press conference at the BB’s headquarters on Sunday, has fixed 7.5 per cent inflation for the current fiscal year, from the earlier 5.6 per cent set in June 2022.
The central bank has also removed the deposit floor rate “considering the current market conditions.”
The central bank termed the country’s near-term economic outlook as quite stable, that it said critically depends on three external issues including the length and intensity of the Russia-Ukraine war, the spree of interest hikes by the Fed, and the re-emergence of the Covid-19 situation and its severity in China.
The improvements in these challenges will expedite Bangladesh’s future economic gains, noted the MPS.
However, in case of any adverse consequences of the above external issues, the Bangladesh economy has enough resilience to remain insulated in its current condition, it added.