Turkish Central Bank cuts rates for seventh consecutive month amid inflation concerns
The Turkish Central Bank cut its overnight lending rate by 25 basis points on Sept. 22, setting aside concerns about inflation in a bid to boost the economy.
The bank left its benchmark one-week repo rate unchanged at 7.5 percent but reduced the highest of the multiple interest rates it uses to set policy to 8.25 percent.
The Central Bank said that recent indicators for the first quarter pointed to a “deceleration” in economic activity, underlining that future monetary policy decisions will be conditional on the inflation outlook.
“Recently released data and indicators regarding the third quarter display a deceleration in economic activity. The committee assesses that current financial conditions are tight,” said the bank, noting that with the supportive measures and incentives provided recently, domestic demand was expected to recover starting from the final quarter.
Some circles have asked for further rate cuts in a bid to boost prospects for stronger consumption-led growth. The economy grew a smaller-than-expected 3.1 percent in the second quarter, data showed this month, yet the inflation rate has continued to be high.
“With the help from falling food prices, headline inflation is expected to display a decline in the short term. Yet, the recent tax adjustment in fuel prices and other cost factors limit the improvement in inflation and thus necessitate the maintenance of a cautious monetary policy stance,” said the bank.
“Taking into account inflation expectations, pricing behavior and the course of other factors affecting inflation, the cautious monetary policy stance will be maintained,” concluded the Central Bank.