Bangladesh Bank has reduced its Standing Deposit Facility (SDF) rate, also known as the policy rate (reverse repo rate), by 50 basis points. 

This move, announced through a circular issued on Tuesday, brings the SDF rate down from 8.50 percent to 8.00 percent, effective from tomorrow, July 16. The central bank's decision signals a gradual shift away from its contractionary monetary policy stance.

According to Bangladesh Bank, this measure is aimed at further activating the interbank money market (call money market) and strengthening liquidity management within the existing monetary policy framework. 

However, the upper limit of the policy interest rates, including the Standing Lending Facility (SLF) rate at 11.50 percent and the Overnight Repo Rate at 10.00 percent, remain unchanged.

Market analysts suggest that this reduction could help increase liquidity in the market, which may positively impact investment and credit flow to the consumer sector. 

Bangladesh Bank set to relax monetary policy, ease interest rates

Nevertheless, they also note that the long-term impact of such a rate cut on financial stability, particularly amidst ongoing inflationary pressures, remains to be seen.

Meanwhile, the central bank is preparing to announce its new monetary policy by the end of this month. 

Based on a review of the current economic momentum, stability, and investment climate, there are indications that the upcoming policy might be somewhat more relaxed or investment-friendly.