Bangladesh Bank trims benchmark rate for first time in two years

Bangladesh Bank has cut its benchmark policy rate for the first time in nearly two years, reducing it by 50 basis points to 9.5 percent, a month after unveiling its latest monetary policy.

The decision was taken at Thursday's meeting of the Monetary Policy Committee (MPC) and will take effect on Aug 2, Bangladesh Bank said in a statement.

The MPC said members reviewed domestic and global inflation, investment trends, private-sector credit, employment, economic growth and the balance of payments before deciding to lower the repo rate from 10 percent.

The central bank also cut the Standing Lending Facility (SLF) rate, under which banks borrow short-term funds, by 50 basis points to 11 percent.

However, the Standing Deposit Facility (SDF) rate, the lower bound of the interest rate corridor for banks' deposits with the central bank, remains unchanged at 7.5 percent.

On Jun 30, shortly after the BNP government took office, Bangladesh Bank announced a contractionary monetary policy for the following six months, keeping the policy rate at 10 percent while tightening liquidity to curb inflation.

The policy also lowered the private-sector credit growth target to 6.8 percent by December from 8.5 percent, reflecting weaker demand. Credit growth in the sector stood at 4.75 percent at the end of April.

The overall domestic credit growth target was reduced to 10.5 percent from 11.5 percent, while the government borrowing target was raised slightly to 21.8 percent.

Bangladesh Bank had steadily raised the policy rate from late 2022 to tackle inflation, which peaked at 11.66 percent in July 2024. 

Since then, it had kept the rate at 10 percent under successive contractionary monetary policies.