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Bangladesh raises banks' reserve requirement to cool inflation
June 24, 2014 / 5:56 AM / 3 years ago

Bangladesh raises banks' reserve requirement to cool inflation

DHAKA, June 24 (Reuters) - Bangladesh raised the proportion of deposits that banks must keep in reserve at the central bank, effective from Tuesday, in a move to mop up excess cash to cool inflationary pressures.

The Bangladesh Bank said it was lifting banks’ reserve requirement ratio by 50 basis points to 6.5 percent, its first increase since 2010.

“The move will drain excess money from the system and ultimately it will curb inflation,” Shitangshu Kumar Sur Chowdhury, a deputy governor of the central bank, told Reuters.

The measure is expected to drain about 32 billion taka ($415 million) of cash from the banking system, he added.

Bangladesh’s annual inflation eased marginally in April to 7.46 percent as costs of both food and non-food items rose at a slower pace, but price pressures remain elevated.

The government aims to bring down inflation to below 7 percent in the coming fiscal year, starting next month.

The central bank has kept its key policy rates unchanged since February last year when it cut rates by half a percentage point on a slower economic growth outlook. (Reporting by Ruma Paul; Editing by Kim Coghill)

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