Turkey's Central Bank cuts interest rates 100 bps

ANKARA

The Central Bank of Turkey on Wednesday reduced its one-week repo rate 100 basis points.

The bank's policy rate -- also known as the one-week repo rate -- fell to 8.75% from 9.75%.

The decision came in a statement from the bank's Monetary Policy Committee (MPC) meeting -- the fourth of twelve meetings scheduled for 2020.

Since July 2019, the bank lowered interest rates for the eight time in a row.

The bank noted that economic activity started to weaken in mid-March due to the effects of coronavirus pandemic on external trade, tourism and domestic demand.

Recent monetary and fiscal measures, aiming to mitigate economic fallout of the coronavirus, will contribute to financial stability and post-pandemic recovery by supporting the potential output of the economy, it said.

The bank expects current account balance to follow a moderate course throughout the year thanks to the restraining effects of commodity prices and imports.

According to latest data by the bank, Turkey’s current account balance posted a deficit of nearly $1.23 billion in February and $1.8 billion in January.

Sharp decline in international commodity prices affects inflation outlook favorably despite recent depreciation in Turkish lira due to global developments, it underlined.

The country's annual inflation rate in March stood at 11.86%, down from 12.37% the previous month, the Turkish Statistical Institute (TurkStat) data showed.

With all developments taken into account, the bank highlighted that the risks on the year-end inflation projection are on the downside.

The Turkish Central Bank stressed the importance of continuing cautious monetary stance to keep disinflation process in track with targeted path.

The Turkish government targeted 8.5% inflation rate for this year as laid out in its new economic program for 2020-2022 announced last September.

Turkey’s Central Bank forecasts year-end inflation to be at 8.2% in 2020.

The Anadolu Agency survey of 15 economists expected on Monday an average fall of 50 basis points on the one-week repo rate, with the lowest estimate at 25 basis points, and the highest at 100.

In March, the Central Bank cut its interest rate by full point amid virus fears to 9.75% from 10.75%.

Since the beginning of this year, the bank has cut the rate by a total of 325 basis points.

In 2019, the bank gradually cut the rate by 1,200 basis points to 12% from 24%.