The Bangladesh Bank (BB) is expected to increase the policy rate or repo rate by 50 basis points to 9 percent from the current 8.50 percent next week to curb the country’s escalating inflation.
This adjustment comes as inflation reached 11.66 percent in July, the highest level recorded since at least the fiscal year 2010-11. Surging food prices were largely to blame.
According to the Bangladesh Bureau of Statistics (BBS), Bangladesh concluded the fiscal year 2023-24 with a consumer price index of 9.73 percent, significantly surpassing the government’s target of 7.5 percent. This marks the fifth consecutive year that inflation has exceeded the government’s goals, with the first month of FY25 showing no signs of easing.
BB Governor Ahsan H Mansur announced at a press briefing that the central bank would likely continue raising the policy rate until inflation is controlled. He stated that a monetary policy committee meeting would be held early next week, with the new rate expected to be announced shortly thereafter.
In a recent BBC interview, the governor also indicated that further rate hikes to 10 percent or more might be necessary in the coming months to rein in inflation.
The BB last raised the policy rate on May 8, increasing it by 50 basis points to 8.5 percent, in line with the recommendations of the International Monetary Fund (IMF). This was part of the central bank’s broader strategy to combat rising prices through a contractionary monetary policy to reduce demand.
