Bangladesh Bank has reduced its key policy interest rate by 50 basis points in a move aimed at improving liquidity in the banking system and stimulating private sector lending.

The central bank announced on Thursday that the new rates will take effect from August 2 as part of its expansionary monetary policy stance.

The decision was taken at the 13th meeting of the Monetary Policy Committee (MPC) for the 2026-27 fiscal year, chaired by Bangladesh Bank Governor Md. Mostakur Rahman, FCMA. The meeting reviewed domestic and global inflation trends, private investment, credit growth, employment, economic activity and the country’s external sector before deciding to ease monetary policy.

Under the new policy, the repo rate, or policy interest rate, has been lowered to 9.50% from 10.00%. The reduction will lower borrowing costs for commercial banks when they obtain funds from the central bank, potentially enabling them to offer loans to businesses and consumers at lower interest rates.

The central bank also cut the Standing Lending Facility (SLF) rate by 50 basis points to 11.00% from 11.50%, while keeping the overnight repo rate unchanged at 7.50%.

Banking sector officials said the lower policy rate is expected to encourage lending, improve credit availability and increase money circulation in the economy. However, economists cautioned that stronger credit growth and higher consumer demand could also fuel inflationary pressures if money supply expands too rapidly.

The rate cut comes as private sector credit growth has remained weaker than targeted. Although the central bank had aimed for 8% private sector credit growth by June 2026, actual growth slowed to 5% in May.

In its monetary policy for the first half of fiscal year 2026-27, Bangladesh Bank has revised the private sector credit growth target to 6.8% by December, while setting the domestic credit growth target at 10.5%. The latest policy easing is intended to help achieve those lending objectives while supporting broader economic activity.