Bangladesh Bank (BB) is expected to raise the policy rate, or repo rate, by 50 basis points to 9% from the current 8.5% next week to combat rising inflation. This decision follows a sharp increase in inflation, which reached 11.66% in July, the highest since at least fiscal year 2010-11, driven primarily by escalating food prices.
The country ended fiscal year 2023-24 with an inflation rate of 9.73%, significantly above the government’s target of 7.5%. The inflationary trend has continued into the first month of fiscal year 2024-25, showing no signs of easing. BB Governor Ahsan H Mansur indicated that the central bank will continue to raise the policy rate until inflation is under control, with the goal of reducing inflation to 5-6% within the next seven to eight months. The anticipated rate hike is part of the central bank’s ongoing contractionary monetary policy, aimed at curbing demand by making borrowing more expensive.
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