Turkey’s central bank Tuesday cut its benchmark interest rate for the first time in six months, against a fluctuating background of slumping oil prices; optimism that inflation will drop further and mounting political pressure for lower borrowing costs.
The Monetary Policy Committee cut the benchmark one-week repo rate to 7.75% from 8.25%, the central bank said in a statement on its website. Policymakers didn’t make any changes to the interest-rate corridor, which ranges between the overnight borrowing rate of 7.5% and the overnight lending rate of 11.25%.
According to a Wall Street Journal survey, nine out of 12 economists expected the central bank to keep interest rates unchanged, while some bet for a rate cut. Three economists expected the central bank to cut both the one-week repo rate and the overnight lending rate by 25 basis points and the overnight borrowing rate by 25-50 bps.
The central bank said a “tight stance in monetary policy and the macroprudential measures taken are impacting inflation positively, particularly energy and non-food inflation indicators and expectations. Moreover, falling commodity prices led by oil are supporting a fall in inflation.” The central bank said that, given these positive developments, the committee had decided to “make a measured rate cut to one-week repo rate.”