Interest rates may rise again if inflation doesn't decrease in January
Bangladesh Bank spokesperson and executive director Husne Ara Shikha has stated that interest rates may increase again if inflation does not decline in January. She said, "We have already raised policy interest rates multiple times to control inflation. We hope inflation will decrease in January. If it does not, we may raise the rates again." Image courtesy: online
She made these remarks at a press conference held at the central bank’s headquarters on Tuesday.
In response to a question regarding inflation, Husne Ara Shikha noted, "However, businesspeople are not happy with the interest rate hikes because they have to bear additional costs for bank loans, which slows down investments. Therefore, it is essential for other organizations to work effectively alongside the central bank. Investment decline is not solely due to interest rate increases. Factors like infrastructural development, energy supply, and communication systems are also closely linked to investment growth. Hence, the central bank’s efforts alone cannot fully bring inflation under control."
Notably, private sector credit growth has dropped to a very low level. Private sector credit growth in November last year was 7.66% compared to the same period last year. Which grew the lowest in 3 and a half years, political instability Loan disbursement fell due to fraud and restructuring of 11 weak banks, suspending new loan disbursement. These banks. To meet the needs of depositors they are struggling
Declining demand for private credit has led many banks to increase their investments in treasury bills and government bonds. which gives higher returns than loans Loans are at risk of default. While bills and bonds have a guaranteed return. As a result, in the upcoming year 2024 Many banks have experienced significant increases in operating profits. This is considered to be the highest level on record.
According to data published by Bangladesh Bank. Private sector credit growth was 7.66% in November last year. This is the lowest since May 2021, with a growth rate of 7.55%. The growth rate achieved in November was below the central bank’s target. For the first half of the 2024-25 fiscal year (July-December), Bangladesh Bank had set a target of 9.8% credit growth.
