The Bangladesh Bank is likely to further raise the repo rate – the money market key interest rate also known as policy rate – at 25 to 50 basis points in the upcoming monetary policy, to help reduce persistently high inflationary pressure through a reduction in money supply.
Speaking to The Business Post, a senior central bank official said on condition of anonymity, “The Bangladesh Bank has a plan to increase the policy rate, and it could go to a maximum 8.25 per cent.”
Currently, the country's policy rate is 7.75 per cent.
The central bank will announce its next monetary policy on Wednesday for the second half of FY24, in a bid to tame inflation and ease exchange rate pressure. As part of the preparation, the draft monetary policy was approved at the central bank board meeting on Sunday.
Officials who attended the board meeting said in the upcoming monetary policy, the exchange rates would not be real market-based as the foreign exchange market is not stable yet.
The government policymakers instructed to keep the market under control by following the crawling peg system.
“Crawling pegs help control currency movement, especially when there are threats of devaluation. The purpose of crawling pegs is to provide stability,” said a central bank official involved in the preparation of the monetary policy statement.
The monetary policy will focus on controlling the growing inflation, which has been a pressing issue over the last eight months.
On condition of anonymity, a senior central bank official told The Business Post “It is not certain that the crawling peg system would be efficient or not. Because those countries are depending on remittance for USD, they should be regulated by the central bank.
“Bangladesh has to earn more USD through export instead of remittance. Otherwise, this system will not be efficient properly in this economy.”
Economist and co-founder of PRI Dr Sadiq Ahmed, Director General of the Bangladesh Institute of Development Research (BIDS) Binayak Sen, and Chairman of the Economics Department of the Dhaka University Masuda Yasmin are in the monetary policy committee.
