This marks the fourth time that the key interest rate has been raised this year. In August 25 this year, the central bank had increased the policy rate by 50 bps to 9 per cent.

"A contractionary monetary policy will be followed as long as inflation does not come under control. The policy rate will be hiked once next week and again next month," central bank governor Ahsan H Mansur journalists during a briefing.

"I am optimistic that inflation will stabilise by March or April," he was quoted as saying by domestic media reports.

The hike means banks under liquidity crunch will now have to pay more interest for loans from the central bank. It would also lead to a rise in interest rates for customers that will reduce consumer spending, and which would ultimately reduce inflation.

The country's inflation fell to 10.49 per cent in August from the record 11.66 per cent in July, marking a 1.17 percentage point decline—the largest drop since 2013, data from the Bangladesh Bureau of Statistics show.

Fibre2Fashion News Desk (DS)