"Is it Possible to Maintain an Inflation Rate of 7.5% by Fiscal Year-End?"

The policy rates should be increased further from the current 8.5 percent to at least 10 percent without further delay to curb high inflation, Ahsan H Mansur, executive director of Policy Research Institute of Bangladesh (PRI).

This comment was made during a post-budget discussion organized by the Metropolitan Chamber of Commerce and Industry, Dhaka.

As contractionary monetary policy was taken to control and reduce the money supply in the market, aiming to control the high inflation rate 9.89% reported in May. As part of the contractionary monetary policy, raise the interest rate so that reduce the money supply in the market. Six months Moving average rate of Treasury bill, known as SMART rate, that was introduced in July 2023 is cancelled and the market driven interest rate is declared.

The government and Central Banks simultaneously try to focus to control inflation. As a results, central bank adopts, hawkish monetary policy which means concentrating solely to reduce the inflation instead of considering economic growth.

In addition, if the monetary policy is tightened and raise the policy rate from 8.5% to 10.00%, it will help to reduce the inflation rate but definitely it will increase the cost of borrowings, which may impact on banks, and commercial banks should find low-cost fund for lending.

It is not possible to control the inflation rate overnight, it takes some time to see the results.