Bangladesh Bank (BB) raises policy interest rate once more to control high inflation. Interest rates have been increased by 50 basis points across the board of central bank and interbank lending instruments.
This decision was taken in the monetary policy committee meeting on Sunday, August 25 which was last increased on May 8.
From now on, interest rate on borrowing from the central bank will be at 9 percent. And the maximum of inter-bank loans is at 10 and a half percent and the minimum is at 7 and a half percent.
This decision was taken in the monetary policy committee meeting on Sunday August 25 which was last increased on May 8.
From April 2020 to June last year, the interest rate was capped at 9 percent. After the start of the IMF's loan program, a new method called 'SMART' was first introduced to determine the interest rate from July last year.
The interest rate at customer level was fixed by adding 3 percent to 6-month average interest on government treasury bills pushing the highest interest rate in April at 13.55 percent.
However, following the IMF condition; three important economic decisions were taken in one day on May 8 leaving the consumer interest rate to market, raising the policy rate and introducing a 'crawling peg' policy on dollar rate.
The intermediate rate was set at Tk 117 with an opportunity to sell dollars by adding one percent to this.
Dr. Ahsan H. Mansoor on assumption of the post of governor of the central bank recently gave an opportunity to sell at dollar up to Tk 120 by adding two and a half percent to the intermediate rate at Tk 117 to the dollar.
Now the policy rate has been increased by 50 basis points. As a result, the interest rate at the consumer level will increase further. Usually interest rates and dollar are raised to control demand.
In last July inflation stood at 11.66 percent. Controlling inflation by raising interest rates and value of dollar is a globally accepted method. After the post-Corona Russia-Ukraine war, most of the countries in the world raised interest rates but in Bangladesh it was at 9 percent.
According to the central bank's circular on Sunday, the policy interest rate has been increased as per the decision of the 5th meeting of the Monetary Policy Committee.
The overnight repo policy rate used by banks for borrowing from the central bank has been increased from 8.5 percent to 9 percent.
Besides, the upper limit of Standing Lending Facility (SLF) has been increased from 10 percent to 10.50 percent and the lower limit of Standing Deposit Facility (SDF) has been increased from 7 percent to 7 and a half percent of inter-bank lending policy.
This means that banks can charge a maximum of 10.5 percent and a minimum of 7.5 percent interest on inter-bank loans.
