Bangladesh Bank (BB) has hiked its key policy rate (repo rate) by 50 basis points, raising it to 9.50 percent to belt inflation.

The central office issued a circular in this regard on Tuesday, which will come into effect on September 25.

The central bank also increased the Standing Landing Facility (SLF) and the Standing Deposit Facility (SDF) by 50 basis points to 11 percent and 8 percent respectively at the same time.

An increase in the policy rate will make bank borrowing costlier, forcing people to cut expenditures and curtail demand, subsequently bringing down inflation.

On August 25, the central bank hiked the policy rate by 50 basis points to 9 percent.

Over three months ago, the policy rate was last increased by 50 basis points to 8.5 percent on May 8, by the previous government.

At that time the rate was hiked in line with the prescription of the International Monetary Fund (IMF) as there was no sign of easing in inflation, which stayed over 9 percent since March last year.

After the 12-month average inflation stood at 9.73 percent in FY2023-24. The consumer prices were up by 11.66 percent in July last, the highest at least since FY2010-11. As a result, the purchasing capacity of people worsened according to the Bangladesh Bureau of Statistics (BBS).

The BB Governor Dr Ahsan H Mansur has set a target to keep inflation within 6-7 percent within March or April of 2025.