Turkey's Central Bank Cuts Interest Rates After Nearly Two Years

Investing.com -- After signs of easing in consumer inflation, the Central Bank of Turkey has implemented its first interest rate cut in nearly two years. The bank stated that any potential future easing measures would depend on price data.

Under the leadership of President Fatih Karahan, the Monetary Policy Committee lowered the one-week repo rate from 50% to 47.5% on Thursday. This decision followed a period of eight months in which the rate was maintained at a steady level.

The interest rate cut was larger than the expected 175 basis points as forecasted in a Bloomberg survey prior to the decision. The monetary authority also reduced the corridor known as the interest rate corridor from 600 basis points to 300 basis points. This move was interpreted by investors as a hawkish signal. The monetary authority clarified that the decision made on Thursday does not imply that interest rates will continue to be lowered in future meetings.

The Central Bank stated, "The Committee will judiciously make its decisions on a meeting-by-meeting basis, focusing on the inflation outlook." It also noted a decrease in the underlying trend of inflation and a slowdown in domestic demand in the last month of the year.

Following the decision, the value of the Turkish Lira remained relatively stable, trading at 35.2387 against the dollar, reflecting a 0.1% decrease as of 14:15 Istanbul time. The Borsa Istanbul 100 Index recorded a 1% increase after a brief earlier rise. Meanwhile, the yield on Turkish government bonds maintained its earlier declines.