The Bangladesh Bank is contemplating a policy rate hike for the second half of the fiscal year (January-June) 2023-24 to combat inflation, considering a 25 to 50 basis points increase in the repo rate, potentially reaching 8% to 8.25%. The move is expected to directly impact borrowing costs, prompting commercial banks to raise interest rates on loans.
Concurrently, the central bank is considering reducing the spread between standing lending and deposit facility rates, aiming for a more confined corridor. The adjustment may fall within ±150 to ±175 basis points. This strategic shift aligns with a contractionary monetary policy, as the central bank raised rates on all types of treasury bills to reduce money supply. The inflation rate target for the new policy is 6-7%. The previous policy, for the first half of FY24, tightened money flow to the private sector, lowering the credit growth projection to 11%. The central bank is set to announce the new policy on January 17th.
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