The Bangladesh Bank (BB) has once again raised its policy interest rate, pushing it up to 10 per cent in a fresh attempt to tackle inflation by withdrawing excess liquidity from the market.
The decision, outlined in a circular issued on Tuesday, will take effect from 27 October.
The new policy rate sees a 50 basis point increase from its previous level of 9.50 per cent, meaning that the interest rate at which commercial banks borrow from the central bank will also rise, leading to an overall rise in borrowing costs across the financial system.
Central banks typically resort to such measures as part of efforts to cool down inflation and stabilise the broader economy. By making borrowing more expensive, consumer spending and investment tend to slow down, which in turn, helps in reducing inflationary pressures.
This latest move by the Bangladesh Bank aligns with the global trend of tightening monetary policy, as central banks worldwide continue to battle surging inflation.
In addition to the increase in the policy interest rate, the central bank has also raised the upper limit of the standing lending facility (SLF) rate by 50 basis points, moving it from 11 per cent to 11.50 per cent.
The lower limit of the standing deposit facility (SDF) rate has similarly been increased, rising from 8 per cent to 8.50 per cent.
These adjustments reflect the central bank's commitment to maintaining economic stability amid challenging financial conditions.
