Bangladesh Bank increases policy rate to 5%

With an immediate effect, the central bank Sunday increased its policy rate by 25 basis points to 5% in a bid to keep the country's inflation in check.

The rise in the policy rate, which is also known as repurchase agreement (repo), is likely to make credit costly as banks will have to borrow from the central bank at the new rate.   

The decision to increase the repo rate was taken at the 54th meeting of the Monetary Policy Committee, the Bangladesh Bank said in a press statement.

The press statement, however, did not mention any change to current 4% reverse repo rate.

The Bangladesh Bank said the global economy has turned around thanks to mass Covid-19 vaccination programme and expansionary fiscal and monetary policies adopted by governments and central banks of different countries.

At the same time, the central bank said, rising global demand, disruptions in the international supply chain, protracted Russia-Ukraine war and new uncertainties in the global economy have led to rising prices of all commodities in the global market.

Considering the overall macroeconomic situation, the bank said it decided to up the repo rate from the existing 4.75% to 5.00% with immediate effect.