Turkish central bank slashes key policy rate to 14%
Turkey’s central bank cuts its benchmark policy rate for the fourth consecutive time on Thursday, in line with market expectations, News.Az reports citing Daily Sabah.
The key policy rate – the one-week repo rate – was lowered by 100 basis points to 14% at the Central Bank of the Republic of Turkey’s (CBRT) last Monetary Policy Committee (MPC) meeting of the year.
The bank also signaled it would pause the easing cycle to monitor its effects in the next three months.
“The Committee decided to complete the use of the limited room implied by transitory effects of supply-side factors and other factors beyond monetary policy’s control on price increases and reduced the policy rate by 100 basis points,” the statement by the bank said.
The cycle began in September when the one-week repo interest rate was lowered from 19%. The bank has thus slashed the policy rate by 500 basis points in the last four MPC meetings.
The central bank was widely expected to ease by 100 basis points, according to surveys.
The latest cut comes amid high volatility in the exchange rate, which has triggered the CBRT to intervene in the forex market four times in the last two weeks, selling dollars to prop up the Turkish lira.
The lira weakened as much as 3.57% after the monetary policy meeting to 15.34 against the greenback.
Turkey has been pursuing a new economic model based on lower interest rates, a policy direction President Recep Tayyip Erdoğan says will boost production, jobs, exports and growth.
Erdoğan has repeatedly defended the low-rate policy over the last three weeks as necessary to boost growth, exports and credit. The government, regulators and the banks association have all rallied around the new economic policy.
On the other hand, annual inflation accelerated to 21.31% last month, the highest reading since November 2018, with staples such as food and gas prices recently jumping.
According to the central bank, inflation pressure is temporary and necessary to expand economic growth and balance the current account.