BB raises lending rate to 10.70% to tame inflation

A day after hiking the policy rate, the Bangladesh Bank today raised the lending rate to 10.70 percent in order to tame the skyrocketing inflation.

As a result, banks now can add a 3.50 percent margin with the reference rate, also known as SMART, which stands at 7.20 percent. As a result, the lending rate will be 10.70 percent.

The previous interest margin was 3 percent.

The six-month moving average rate of treasury bills, abbreviated as SMART was 7.20 percent in September and the rate will be applicable for October.

The central bank withdrew the lending rate cap in June and introduced a new interest rate regime to meet conditions attached to the International Monetary Fund's $4.5 billion loan. But inflation showed no sign of falling sharply.

Average inflation rose 9.63 percent in September, way above the government target of 6 percent for the current fiscal year.

Yesterday, the BB made borrowing costlier as it raised the policy rate by 75 basis points to 7.25 percent to step up its fight against inflation.