The initiative taken by Bangladesh Bank to reduce commodity prices

Bangladesh Bank has announced to increase the repo rate or policy interest rate to reduce the ongoing inflation of the country.

The central bank announced this decision in a circular on Tuesday (October 22).

According to the notification, the policy interest rate or repo rate has been revised by 50 percent points from 9.50 percent to 10 percent. As a result, the interest rate of the money that the banks will borrow from the central bank will increase. That is, Bangladesh Bank is on the path of more contractionary money supply.

As per the new decision, the cap on the standing lending facility (SLF) interest rate corridor has been revised to 11.50 percent by 50 basis points from 11 percent. Apart from this, the lower limit of standing deposit facility (SDF) interest rate of the policy interest corridor has been increased from 8 percent to 8.50 basis points. The decision to increase the policy interest rate will be effective from October 27. 

The new decision will increase the interest rate on the money that commercial banks borrow from the central bank. Besides, the interest rate of deposits kept in banks and loans given by banks will also increase.

According to the data of the government agency Bangladesh Bureau of Statistics (BBS), the inflation rate of non-food products in the country increased to 9.5 percent at the end of July-September quarter.

Earlier on September 23, Bangladesh Bank Governor Ahsan H Mansoor said that the policy interest rate will be increased in two phases in September and October to reduce inflation. The policy interest rate was increased on September 24, the day after the speech of the central bank governor.