Bangladesh Bank raises key interest rate by 50 basis points to 9% to combat inflation

In addition to the key interest rate, the central bank raised the interest rate on the standing credit facility by 50 basis points to 10.5 percent and the interest rate on the standing deposit facility by 50 basis points to 7.5 percent, domestic media reported.

The Monetary Policy Committee of the Central Bank of Bangladesh yesterday raised the policy rate by 50 basis points to 9 percent to combat inflation – the third hike this year. It raised the interest rate on the standing credit facility by 50 basis points to 10.5 percent and the interest rate on the standing deposit facility by 50 basis points to 7.5 percent. The new rates come into effect today.

The new interest rates will come into effect from today, Bangladesh Bank told banks and non-bank financial institutions.

The governor of the central bank, Ahsan H. Mansur, recently announced that the key interest rate or repo rate would be raised initially to 9 percent and then gradually to 10 percent.

He said that while businesses were keen to reduce inflation, the central bank's current monetary policy was effective but would be tightened slightly. Inflation is expected to improve to 5-6 percent within seven to eight months, he said.

Interest rates will continue to rise until inflation begins to fall, and the stable exchange rate will also help reduce inflation, he stressed.

According to the Bangladesh Bureau of Statistics, overall inflation rose to a record high of 11.66 percent last month, up from 9.72 percent in June.

Fibre2Fashion News Desk (DS)