Central Bank Reduces Interest Rates for the Fifth Time in a Row

Source:AA

Turkey's Central Bank has reduced its one-week repo rate 75 basis points.

The policy rate, also known as the one-week repo, decreased to 11.25 percent from 12 percent, the bank said in a statement issued after its first Monetary Policy Committee meeting this year.

The bank scheduled 12 committee meetings for 2020. Last year, the bank held eight MPC meetings, as interest rates fell by 1,200 basis points over the course of the year, from 24 percent.

'Recovery continues'

The Central Bank briefly said the following on its decision:

Recent data indicate that recovery in economic activity continues. Sectoral diffusion of economic activity continues to improve. However, investment demand remains weak. While favorable effects of improved competitiveness prevail, weakening global economic outlook tempers external demand.

As the contribution of net exports to economic growth declines, economic recovery is expected to be sustained with the help of the ongoing disinflation process and improvement in financial conditions. Current account balance, which has recently recorded significant improvement, is expected to maintain a moderate course with the contribution of supportive policy measures.

'Inflation outlook improves'

Inflation outlook continued to improve and inflation expectations sustained their wide-spread decline. The improvement in macroeconomic indicators, inflation in particular, supports the fall in country risk premium and helps contain cost pressures.

Developments in the exchange rate, domestic demand conditions and producer prices have contributed to a mild trend in core inflation indicators. The course of inflation is considered to be broadly in line with the year-end inflation projection.

Accordingly, considering all factors affecting the inflation outlook, the Committee decided to make a measured cut in the policy rate. At this point, the current monetary policy stance remains consistent with the projected disinflation path. (HA/VK)