Bangladesh Bank is expected to raise the policy rate, or repo rate, by 50 basis points to 9 % from the current 8.5 % next week in an effort to curb rising inflation. Inflation reached 11.66 % in July, the highest since at least the 2010-11 fiscal year, primarily driven by soaring food prices, which has significantly impacted people’s purchasing power.
Bangladesh ended the fiscal year 2023-24 with an inflation rate of 9.73%, exceeding the government’s target of 7.5% for the fifth consecutive year. The BB Governor, Ahsan H Mansur, indicated that further rate hikes might be necessary until inflation stabilizes, with hopes that inflation could decrease to 5-6 percent within the next seven to eight months.
This increase in the policy rate, which was last raised in May, is intended to make borrowing costlier, reducing consumer spending and, in turn, lowering inflation. The governor also mentioned that rates might rise to 10 % or more in the coming months if inflation continues to surge.
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