Bangladesh Bank Cuts Policy Rate to 9.5 Percent in First Reduction Since 2020

Dhaka, July 31, 2026 — 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 and signalling a shift toward easing monetary policy. 📉 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 on July 31, 2026, and chaired by BB Governor Md Mostaqur Rahman. 🏛️

📊 The revised rate will take effect on Sunday, according to a BB press statement. The repo rate is the interest rate at which the central bank lends money to commercial banks, and the 50 basis point reduction represents a significant shift in Bangladesh's monetary policy stance. 💰

📊 Key Rate Changes Announced

📋 Alongside the policy rate cut, the central bank also adjusted other key interest rates:

• 📉 Repo Rate (Policy Rate) — reduced from 10% to 9.5% (first cut in 6 years)
• 📉 Standing Lending Facility (SLF) Rate — reduced from 11.5% to 11% (emergency borrowing rate for banks)
• ➡️ Standing Deposit Facility (SDF) Rate — unchanged at 7.5% (rate BB pays banks for surplus funds)

🏦 The SLF is the highest rate at which banks can borrow emergency funds from BB, while the SDF is the rate at which BB pays banks for parking surplus funds with it. The reduction in both the repo and SLF rates signals a coordinated easing of monetary conditions. 📊

📅 Historical Context: Six-Year Rate Freeze

📈 BB data shows the last policy rate cut came in July 2020, during the Covid-19 pandemic, when the central bank cut rates to support the economy. The repo rate timeline reveals:

• 📅 July 2020 — Last rate cut, repo at 4.75% during Covid-19
• 📅 July 2020 – May 2022 — Repo held at 4.75% for nearly 2 years
• 📈 May 2022 onwards — Rate raised repeatedly to tackle rising inflation
• 📊 October 2024 — Repo reached record 10%, held unchanged since then
• 📉 July 31, 2026 — First cut in 6 years, repo reduced to 9.5%

🔄 The central bank had pushed the repo rate to a record 10 percent by October 2024 to combat persistently high inflation, and it had remained unchanged for nearly two years until this cut. 💹

📉 Inflation Context and Rationale

📊 The rate cut comes as inflation has eased in recent months:

• 📉 June 2026 inflation — 9.16% (down from 9.42% in May)
• ⚠️ Still above target — inflation remains above the government's target
• 🏦 Structural challenges — particularly in the energy sector

🏛️ The MPC reviewed domestic and global inflation, bank lending, employment, and economic growth before deciding to lower the policy rate. The committee included:

• 👤 Deputy Governor Md Habibur Rahman
• 👤 Md Mustafa Kamal Mujeri — Institute for Inclusive Finance and Development
• 👤 AK Enamul Haque — head of Bangladesh Institute of Development Studies
• 👤 Firdousi Naher — chairperson of economics department, Dhaka University
• 👤 Mohammad Akhtar Hossain — BB chief economist
• 👤 Imam Abu Sayeed — executive director at BB

💬 Industry Reaction

🏦 Syed Mahbubur Rahman, CEO of Mutual Trust Bank, offered a measured response to the rate cut:

"We welcome Bangladesh Bank's 50 basis point policy rate cut, though inflation remains above 9 percent. 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."

⚠️ The CEO's warning about energy sector challenges reflects the ongoing gas crisis that has cut textile production by 50% and disrupted RMG manufacturing across the country. The rate cut, while positive, may have limited impact if industrial operations remain constrained by energy shortages. 🔥

🔄 Shift from Predecessor's Tight Stance

📊 The rate cut follows signals from Governor Mostaqur Rahman, who took office in February 2026, that he wanted to ease monetary policy to support economic growth and businesses. This marks a clear shift from the tighter stance adopted by his predecessor Ahsan H Mansur, who had prioritised inflation control through high interest rates. 📈

🏦 The new governor's approach reflects a balanced monetary policy — acknowledging that inflation has moderated while recognising the need to support credit growth and economic activity. The 50 basis point reduction is a measured step that avoids aggressive easing while signalling the central bank's willingness to adjust rates as conditions evolve. 🎯

🔮 Implications for Bangladesh's Economy

📈 The policy rate cut has several implications for Bangladesh's economy:

• 💰 Lower borrowing costs — businesses may see reduced interest rates on loans
• 📊 Credit growth potential — may stimulate lending if energy constraints ease
• 💵 Exchange rate impact — could affect the taka's value against the dollar
• 🏭 Industrial support — particularly relevant given the ongoing gas crisis
• 📈 Inflation management — BB will monitor if the cut affects inflation expectations

🌐 However, as the Mutual Trust Bank CEO noted, the rate cut alone may not drive significant credit growth without addressing structural challenges in the energy sector and broader economy. The central bank will likely continue monitoring inflation data and economic indicators to determine if further adjustments are needed in the coming months. 📊