BB slashes policy rate by 50 basis points to boost credit flow
In a move to stimulate the economy, Bangladesh Bank announced a 50-basis-point cut to its Standing Deposit Facility (SDF) rate, also known as the policy rate (reverse repo rate), reducing it from 8.50 per cent to 8.00 per cent.
The decision, detailed in a circular issued on Tuesday, July 15, 2025, takes effect from Wednesday, July 16, signaling a shift toward a more accommodative monetary policy to enhance credit flow and market liquidity.
The reduction in the SDF rate marks a departure from the central bank’s previous contractionary approach, aimed at curbing inflation. Bangladesh Bank stated that the move is designed to invigorate the interbank money market (call money market) and improve liquidity management within the current monetary policy framework.
The Standing Lending Facility (SLF) rate at 11.50 per cent and the Overnight Repo Rate at 10.00 per cent remain unchanged, maintaining the upper limits of the policy rate corridor.
Market analysts view the rate cut as a strategic step to increase liquidity, potentially spurring investment and easing credit access for consumers. “This reduction could inject vitality into the financial system, encouraging lending and economic activity,” said a senior economist. However, they caution that the long-term effects on financial stability, particularly with ongoing inflationary pressures, will require close monitoring.
The central bank is gearing up to unveil its new monetary policy by the end of July 2025. Sources indicate that, based on assessments of current economic momentum, stability, and investment climate, the upcoming policy may adopt a more investment-friendly stance. This could further support Bangladesh’s efforts to stimulate growth while navigating challenges such as inflation and global economic uncertainties.
Bangladesh Bank’s decision to lower the SDF rate reflects a delicate balancing act between fostering economic growth and maintaining financial stability. As the market anticipates the forthcoming monetary policy, all eyes are on how the central bank will fine-tune its strategies to support investment and credit flow while keeping inflationary pressures in check.