Turkey Central Bank Cuts Rate By 50 Bps

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Turkey’s central bank decided to cut its interest rates by 50 basis points as widely expected, as coronavirus pandemic dampened exports, domestic demand and tourism.

The Monetary Policy Committee of the Central Bank of the Republic of Turkey, led by Governor Murat Uysal, cut the policy rate, which is the one-week repo auction rate, to 8.25 percent from 8.75 percent.

The decision came in line with expectations. This was the fourth reduction so far this year.

The bank observed that despite the recent weakness in the Turkish lira due to global developments, international commodity prices, especially crude oil and metal prices, affect inflation outlook favorably.

Consumer inflation might follow a slightly higher course in the short-term due to seasonal and pandemic-related effects on food prices, but demand-driven disinflationary effects will be more prevalent in the second half of the year, the bank said.

The central bank reiterated that it will use all available instruments in pursuit of the price stability and financial stability objectives.

Despite the fall in exports and tourism revenues due to the pandemic, the central bank expects the current account balance to follow a moderate course throughout the year due to the restraining effects of commodity prices and imports.

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