Bangladesh lowers interest rate despite persistent inflation risks

Bangladesh Bank cut its policy interest rate by 50 basis points to 9.5% in the first quarter of 2026, shifting its focus toward employment, industrial lending and investment despite persistent inflation risks.

The central bank had maintained a restrictive interest rate policy for about two years to control prices. Officials said the approach weakened private-sector loan growth, stalled employment and contributed to gross domestic product growth falling to 4%.

Inflation stood at 9.04% in April, climbed to 9.42% in May and eased to 9.16% in June. Average inflation during the 2025-2026 fiscal year was 8.68%.

“If we cannot create employment or increase people’s incomes while inflation continues to rise, people face a double impact,” a Bangladesh Bank representative said.

Officials said the rate cut could help reopen factories and revive production, but warned that wars, global political instability and energy prices remain major challenges.