Bangladesh Bank has reduced the policy rate by 50 basis points to 9.50 per cent just a month after announcing a cautious and contractionary monetary policy aimed at inflation combat.

Amid cries from business circles, the central bank makes the downward adjustment in its benchmark rate in 22 months notwithstanding inflation remaining elevated.

The new rate will come into effect from August 2, according to a press release issued by the central bank following a meeting of the Monetary Policy Committee (MPC) held Thursday.

The central bank said the committee extensively reviewed domestic and global inflation trends alongside investment, private-sector credit growth, employment, economic growth and the country's external balance before reaching the decision.

"The MPC, after reviewing the latest developments in domestic and global economic indicators, decided to reduce the policy (repo) rate by 50 basis points from 10.00 per cent to 9.50 per cent," the statement reads.

The MPC also lowered the Standing Lending Facility (SLF) rate by 50 basis points to 11.00 per cent from 11.50 per cent, while leaving the Standing Deposit Facility (SDF) rate unchanged at 7.50 per cent, maintaining the lower bound of the interest- rate corridor.

The first MPC meeting of the current fiscal year was chaired by Bangladesh Bank Governor Mostakur Rahman. Deputy Governor Habibur Rahman, economist Mustafa K Mujeri, BIDS Director-General A K Enamul Haque, Dhaka University Economics Department Chair Ferdousi Nahar, Chief Economist Mohammad Akhtar Hossain, and Executive Director Imam Abu Sayeed attended the meeting.

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