Central Bank Reduces Policy Interest Rate from 10.75 to 9.75 Percent

* Photo: Central Bank

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The Central Bank of the Republic of Turkey (TCMB) Monetary Policy Committee convened today (March 17) and has reduced the one-week repo auction rate (policy rate) from 10.75 percent to 9.75 percent.

Chaired by Central Bank Chair Murat Uysal, the Monetary Policy Committee has released a written statement after their meeting and announced the interest rate cut briefly as follows:

'Coronavirus pandemic closely monitored'

"As developments regarding the spread of the coronavirus have weakened global growth outlook, central banks in advanced and emerging economies have taken coordinated expansionary measures.

"The pandemic disease is closely monitored for its evolving global impact on capital flows, financial conditions, international trade and commodity prices.

'Significant improvement before the outbreak'

"In the period preceding the coronavirus outbreak, Turkey's macroeconomic indicators improved significantly. A sustained fall in inflation and a sizable adjustment in the current account were achieved. The recovery of economic activity became stronger along with the improvement in financial conditions.

"In order to contain negative effects of the coronavirus pandemic on the Turkish economy, it is of crucial importance to ensure the healthy functioning of financial markets, the credit channel and firms' cash flows. Accordingly, with an aim to support financial stability, the central bank will implement a comprehensive set of measures.

'Downside risks on year-end inflation have increased'

"Developments in inflation expectations, domestic demand conditions and producer prices have contributed to a mild trend in core inflation indicators.

"Despite the recent depreciation in the Turkish lira due to global developments, the sharp fall in international commodity prices, especially crude oil and metal prices, affects inflation outlook favorably.

"Furthermore, due to the weakening in global trade and measures such as travel restrictions, the disinflationary effect of aggregate demand conditions has increased to some extent. In this respect, it is considered that downside risks on the year-end inflation projection have increased."

Seventh interest rate cut in a row

The Central Bank's recent interest rate cut has marked the seventh interest rate in a row. After Central Bank Governor Murat Çetinkaya was removed from office and Murat Uysal was appointed in his place, the Monetary Policy Committee took its first decision of interest rate cut in July and cut the policy rate from its former level of 24 percent to 19.75 percent.

After its meeting on September 12, 2019, the Monetary Policy Committee of the Central Bank lowered the policy rate to 16.50 percent. The Committee reduced the interest rate to 14 percent on October 24, to 12 percent on December 12 and to 11.25 percent on January 16.

On February 19, the Central Bank decreased the policy interest rate from its current level of 11.25 percent to 10.75 percent. (HA/SD)