The Six-Month Moving Average Rate of the Treasury Bill (SMART), Bangladesh’s benchmark interest rate, experienced a noteworthy 29 basis points surge in November 2023, reaching 7.72% —the highest since its inception. This increase, driven by the central bank’s effort to combat inflation and tighten liquidity, signals a potential rise in loan costs. As a result, the maximum lending rate for banks in December will be 11.47%, with a 3.75% point addition to the SMART rate. The surge in lending rates is attributed to the elevated interest rates of government treasury bills and successive policy rate hikes by the central bank. With the repo rate now at 7.75%, the eighth increase in 19 months, there are concerns about heightened borrowing costs and increased pressure on market liquidity.
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