a year ago

BB raises key policy rate again in a bid to tame inflation

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The central bank has raised its key interest rate, or repurchase agreement rate, by 50 basis points to 5.50 per cent as part of its efforts to control consumer prices.

It is the second time Bangladesh Bank has shifted the rate in a month. The last hike, on May 29, raised the key interest rate by 25 basis points to 5.0 per cent, reports 

Prior to that, the last change in the repo rate was in July 2020.

The repurchase agreement rate is the rate at which the central bank lends money to commercial banks in the event of any shortfall of funds.

The decision was taken to “deal with the demand side pressures along with ensuring the required flow of funds to the priority and productive sectors to promote supply-side activities", the central bank said in its monetary policy statement for the year starting Jul 1, which it released on Thursday.

In May, consumer prices soared to an eight-year high, with headline inflation rising to 7.42 per cent, up from 4.87 per cent a year earlier, according to the Bangladesh Bureau of Statistics.

The food inflation rate accelerated to 8.3 per cent.

“[Bangladesh Bank’s] monetary and credit programmes for FY23 will pursue a cautious policy stance with a tightening bias to contain inflation and exchange rate pressures while supporting the economic recovery process, ensuring the necessary flow of funds to the economy’s productive and employment generating activities for long-term economic growth,” the central bank said in its statement.

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