Larger than expected rate cut raises pressure on Turkish lira
Turkey’s central bank surprised market watchers Wednesday with a significant interest rate cut to bolster the economy amid the coronavirus pandemic, though analysts say the move poses inflationary risks.
ISTANBUL — Surprising market analysts, Turkey’s central bank lowered interest rates more than expected Wednesday in a measure to bolster cheap credit and moderate the economic impacts of the global coronavirus pandemic.
Announcing the eighth interest rate cut in less than a year, the Monetary Policy Committee led by Turkey's central bank governor Murat Uysal reduced its one-week repo rate by 100bps to 8.75%, double the cut predicted by economists in a Bloomberg poll.
In a Wednesday statement, the committee said the move was in line with efforts to maintain “a sustained disinflation process” that aims to “lower sovereign risk, lower long-term interest rates” and create a “stronger economic recovery.”
As in other emerging markets, committee members noted the Turkish lira had depreciated amid the pandemic, but said a sharp price decline for commodities such as oil and metal could have positive effects on inflation.
