Bangladesh’s central bank raised interest rates to rein in consumer prices that surged to a decade high, betting the economy can weather the tightening and other prescriptions demanded by the International Monetary Fund.
The repurchase agreement rate will increase 50 basis points to 6.5%, Governor Abdur Rouf Talukder said at a briefing in Dhaka Sunday. The reverse repo rate was renamed the standing deposit facility and raised by 25 basis points.
Inflationary pressures have stemmed from pandemic-related spending, soaring commodity prices and the weaker taka currency. The consumer price index surged to a decade high of 9.94% in May, overshooting the average inflation target of 6%.
Bangladesh is pushing for an ambitious economic growth target of 7.5% for the fiscal year beginning July in its attempt to graduate from the least developed country status in November 2026. That compares with the government’s 6.03% growth estimate for the year ending June 30, led by a “deceleration” in industries, services and agriculture.
Authorities have raised electricity prices three times this year to comply with an IMF condition to cut subsidies. The central bank brought more flexibility to the dollar-taka exchange rate and narrowed the gap between different exchange rates over inward remittances and export proceeds.
