Turkey’s Central Bank Cuts Benchmark Rate by 75 Basis Points

Turkey’s central bank on Tuesday lowered its benchmark interest rate for the second straight month with a 75 basis points cut to boost economic growth amid mounting political pressure for a looser monetary policy.

The Monetary Policy Committee in Ankara cut the benchmark one-week repo rate to 8.75% from 9.5% after its regular monthly meeting. Policy makers left the overnight borrowing rate at 8% and the overnight lending rate at 12%.

The central bank had been expected to cut rates between 50 basis points and 75 basis points Tuesday, according to 12 economists surveyed by The Wall Street Journal. Some economists had forecast the central bank would cut both its overnight lending rate and one-week repo rate by 50 basis points due to easing inflationary pressure following its peak in May.

In a statement on its website, the central bank cited improving global liquidity conditions for the “measured” cut to its one-week repo rate.

Turkey’s annual inflation rate rose to a two-year high of 9.66% in May from a year earlier, rising from 9.38% in April due to elevated food prices.

Central bank Governor Erdem Basci had said last week the bank may cut benchmark interest rates again, as early as this month, but the rate cut was going to be “measured,” meaning somewhere between 25 and 75 basis points—considered “a joke” by Prime Minister Recep Tayyip Erdogan, who has been pressuring the central bank to lower interest rates more aggressively to spur growth ahead of presidential elections in August.

via WSJ

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Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza