Bangladesh Bank cuts policy rate to 9.5% to boost investment

Bangladesh Bank has reduced its policy interest rate (repo rate) by 50 basis points, bringing it down from 10 percent to 9.5 per cent.

The decision was taken at the 13th meeting of the Monetary Policy Committee (MPC) held on Thursday (July 30) and will come into effect on August 2.

The move aimed at stimulating investment, employment and overall economic growth of the country.

The meeting, chaired by Bangladesh Bank Governor Mostakur Rahman, marked the first change in the policy rate in nearly 21 months.

The central bank said the rate cut is expected to lower borrowing costs for commercial banks, enabling them to access funds from Bangladesh Bank at a cheaper rate. In turn, this is anticipated to ease lending rates for businesses and consumers, supporting private investment and economic activity.

According to Bangladesh Bank, the decision was taken after reviewing the overall domestic and global economic outlook, including inflation trends, private-sector credit growth, investment, employment, economic expansion and the country's external sector balance.

Private investment has remained subdued in recent years amid prolonged political and economic uncertainty, while business leaders have consistently urged the central bank to reduce borrowing costs. Bangladesh Bank believes the latest policy easing will encourage fresh investment, facilitate business expansion and create new employment opportunities.

The central bank had previously pursued an aggressive monetary tightening cycle to contain inflation, raising the policy rate 11 times until October 2024, when it reached 10 per cent. Despite those measures, inflation remained elevated. At the end of the 2025–26 fiscal year, average inflation stood at 9.16 per cent, well above the target of below 7.5 per cent.

For the current fiscal year, Bangladesh Bank has set a new inflation target of 6.5 per cent, while attempting to strike a balance between price stability and economic growth.

Alongside the repo rate cut, the central bank also reduced the Standing Lending Facility (SLF) rate from 11.5 per cent to 11 per cent. However, the Standing Deposit Facility (SDF) rate has been kept unchanged at 7.5 per cent.

Bangladesh Bank said the measures are intended to improve liquidity conditions, strengthen credit flow to productive sectors and support a stronger recovery in investment and economic activity.