The Bangladesh Bank has increased the policy rate by 25 basis points, raising it from 7.75% to 8%, and has revised down the private sector credit growth target for June to 10% from the existing 11%.
Bangladesh Bank (BB) Governor Abdur Rouf Talukder unveiled the new monetary policy for the second half (January-June) of FY24 on Wednesday (17 January) to bring down the runaway inflation.
The BB maintained a contractionary policy stance in the July-December of 2023-24 in its efforts to reduce demand and contain prices.
As such, it hiked the policy rate, or repo rate, twice to 7.75 percent to increase the cost of money.
Additionally, to refine liquidity management, the Standing Lending Facility (SLF) rate has been reduced by 25 basis points to 9.50 percent.
The Standing Deposit Facility (SDF) rate has been increased by 75 basis points to 6.50 percent.
In an attempt to rein in money supply, all monetary targets were revised downwards, with private sector credit growth now set at 10% for June, down from the previous target of 11%.
The central bank has identified global fuel price dynamics, Middle East instability, international prices of essential commodities, the need to reduce inflation to a tolerable level, maintaining exchange rate stability, and addressing the persistent issue of non-performing loans as major challenges.
This policy update from the Bangladesh Bank comes less than a week after the formation of the new government. Prime Minister Sheikh Hasina has declared that the government's primary goal is to combat inflation, urging ministers to exert maximum efforts to control the prices of essential goods.
