Bangladesh Bank (BB) has increased policy interest rate once again as move to curb inflation by withdrawing excess liquidity from the market.
The decision, announced by the central bank on Tuesday, will be effective from October 27.
According to the BB, the policy interest rate (repo rate) has been revised from 9.50 percent to 10 percent by increasing 50 percent points. As a result, the interest rate of the money that the banks will borrow from the central bank will be increased.
Usually, the central banks increase policy rates primarily to combat inflation and stabilize the economy. By raising interest rates, borrowing costs also will go up, which tends to reduce consumer spending and investment, ultimately helping to ease inflation.
This action reflects a broader trend where central banks worldwide are tightening monetary policies in response to rapidly growing inflation.
As the latest decision of BB, the cap on the standing lending facility (SLF) interest rate in the policy interest corridor has been revised up to 11.50 percent by 50 basis points from 11 percent.
Besides, the lower limit of the standing deposit facility (SDF) interest rate of the policy interest corridor has been increased from 8 percent to 8.50 basis points.
