Bangladesh Cuts Key Rate to Four-Year Low to Spur Investment

  • Repo rate cut to 6.75% from 7.25%; lowest since September 2011
  • Forecasts average CPI at 6.07% in June versus 6.2% in December

Bangladesh’s central bank cut interest rates to the lowest level since September 2011 to spur investment as inflation eases.

Governor Atiur Rahman reduced the benchmark repo rate to 6.75 percent from 7.25 percent and the reverse repo rate to 4.75 percent from 5.25 percent, Bangladesh Bank said in a statement in Dhaka on Thursday.

"This is an investment stimulating monetary policy," the statement said. "Falling fuel and commodity prices have globally created a low-inflation environment, paving the way for a considerable reduction in policy rates."

Inflation will ease to an average 6.07 percent at the end of the fiscal year in June from 6.2 percent in December as lower oil costs will partly offset effects of a pay hike for government employees, the monetary authority said.

The government targets gross domestic product growth of 7 percent this fiscal year with the central bank’s projections at 6.8 percent to 6.9 percent. The World Bank sees Bangladesh’s economy expanding 6.7 percent in calendar 2016, matching China and second only to India among the biggest markets.

"Global potential growth has slowed," Rahman said in a separate statement on Thursday. "For the same level of growth, we will need to row harder."

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