The Bangladesh Bank (BB) is set to introduce two new bills with tenures longer than the existing options to tighten monetary policy and address inflation, which has remained above 9 percent since March 2023.

The new 90-day and 180-day BB Bills aim to mop up excess liquidity from the banking system, helping to curb demand-driven price increases and stabilize the economy.

Currently, the central bank offers 7-day, 14-day, and 30-day BB Bills, which were reintroduced in August 2021 after a three-year suspension. Auctions for these shorter-term bills have been conducted regularly, with the latest removing Tk 4.52 billion from the money market at a cut-off yield of 11.10 percent.

The longer-tenure bills are expected to improve BB’s contractionary monetary policy implementation. “We are going to hold auctions of longer tenure bills for better implementation of the monetary policy,” said a senior BB official. The central bank plans to use these tools flexibly, analyzing market conditions to determine auction frequency and volumes.

The decision aligns with the central bank’s ongoing effort to control inflation, which rose to a three-month high of 10.87 percent in October. Soaring food prices, including staples like rice and vegetables, drove the rise. Bangladesh’s annual average inflation also climbed to 10.05 percent in October.

The BB has maintained a contractionary stance for two years, raising the key policy rate 11 times since May 2022. Currently set at 10 percent, the higher rate aims to make borrowing costlier, discouraging spending and investment to rein in demand.