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Bangladesh Bank Raises Policy Rate to 10%
Bangladesh Bank
The Bangladesh Bank has raised its policy rate by 50 basis points to 10%, effective October 27. This decision, announced in a circular on October 22, marks the latest step in the central bank's efforts to manage inflation and stabilize the economy.
This increase follows a previous hike on September 24, when the rate was raised from 9% to 9.5%. Since May 2022, the policy rate has seen ten adjustments, escalating from just 5%. Notably, this is the fifth increase in 2023 alone.
In conjunction with the policy rate hike, the Standing Lending Facility (SLF) has also been raised by 50 basis points to 11.5%, and the Standing Deposit Facility (SDF) has increased to 8.5%. The SLF allows eligible banks to access overnight credit from the central bank, while the SDF enables banks to deposit excess liquidity.
Additionally, the Bangladesh Bank has revised its borrowing policy for banks. Starting this week, banks can now borrow through repurchase agreements (repo) only on Tuesdays, a shift from the previous schedule that allowed borrowing on Mondays and Wednesdays. This adjustment follows the central bank's suspension of daily repo lending since July, aimed at stabilizing the currency market.
In September, Governor Ahsan H Mansur indicated that further increases in the policy rate were expected until inflation is brought under control. During a briefing, he confirmed that a contractionary monetary policy would persist, with additional hikes anticipated in the coming months.
The latest increase aligns with Mansur's earlier projections and underscores the central bank's commitment to addressing ongoing economic challenges.