BB cuts policy rate to 9.5%, first reduction in six years

The Bangladesh Bank (BB) has cut its policy, or repo, rate from 10 percent to 9.5 percent, marking its first reduction in six years.

The repo rate is the interest rate at which the central bank lends money to commercial banks.

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The decision was taken at the 13th meeting of the Monetary Policy Committee (MPC), the first of fiscal year 2026-27, held at the central bank boardroom today and chaired by BB Governor Md Mostaqur Rahman.

The revised rate will take effect on Sunday, according to a BB press statement.

The central bank also reduced the Standing Lending Facility (SLF) rate, the highest rate at which banks can borrow emergency funds from BB, from 11.5 percent to 11 percent.

The Standing Deposit Facility (SDF) rate, at which BB pays banks for parking surplus funds with it, remains unchanged at 7.5 percent.

BB data shows the last policy rate cut came in July 2020, during the Covid-19 pandemic.

The central bank kept the repo rate at 4.75 percent from July 2020 until May 2022. It then raised the rate repeatedly to tackle rising inflation, pushing it to a record 10 percent by October 2024. It had remained unchanged since then.

Inflation has eased in recent months. It fell to 9.16 percent in June from 9.42 percent in May, although it remains above the government’s target.

“We welcome Bangladesh Bank's 50 basis point policy rate cut, though inflation remains above 9 percent,” Syed Mahbubur Rahman, CEO of Mutual Trust Bank, told The Daily Star in an immediate reaction to the development.

He, however, warned that structural challenges, particularly in the energy sector, mean this reduction alone is unlikely to drive significant credit growth.

"Our focus remains on balancing customer needs with prudent risk management while supporting the broader economy,” he added.

The cut follows signals from Governor Mostaqur, who took office in February, that he wanted to ease monetary policy to support economic growth and businesses, marking a shift from the tighter stance adopted by his predecessor Ahsan H Mansur.

According to the central bank, the committee reviewed domestic and global inflation, bank lending, employment and economic growth before deciding to lower the policy rate.

The meeting was attended by Deputy Governor Md Habibur Rahman; Md Mustafa Kamal Mujeri of the Institute for Inclusive Finance and Development; AK Enamul Haque, head of the Bangladesh Institute of Development Studies; Firdousi Naher, chairperson of the economics department at Dhaka University; Mohammad Akhtar Hossain, BB chief economist; and Imam Abu Sayeed, an executive director at BB.