Bangladesh Bank is set to announce a new monetary policy on Thursday for the first half of the current fiscal year 2025-26.
Meanwhile, the central bank has completed preparation for announcing a new slightly expansionary monetary policy, reducing interest rates to enhance credit flow in the private sector, said a senior official of the monetary policy department.
Bangladesh Bank followed a contractionary monetary policy in the last two fiscal years to halt growing inflation. As a result, the private sector credit flow fell below 7 percent in June 2024, due to the high interest rates.
A contractionary monetary policy is a type of monetary policy that is intended to reduce the rate of monetary expansion to fight inflation.
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The business community and individual borrowers were suffering from higher interest rates due to the contractionary monetary policy. The interest rate jumped to 15/16 percent when the central bank lifted the single cap on interest rates in May 2024.
Bangladesh Bank formally instructed banks to set a maximum 9 percent interest rate on all loan products (except credit cards) with effect from April 1, 2020.