Turkey Central Bank Cuts Overnight Lending Rate to 10%

  • Rate lowered by 50 basis points; follows reduction in March
  • Bank's one-week repo and overnight borrowing rates unchanged

Turkey’s central bank cut its overnight lending rate by 50 basis points in the first monetary policy committee meeting chaired by Governor Murat Cetinkaya.

Policy makers lowered the rate to 10 percent, meeting the median estimate in a Bloomberg survey. The central bank maintained its one-week repurchase and overnight borrowing rates at 7.5 percent and 7.25 percent respectively, it said on its website on Wednesday.

The overnight lending rate marks the upper end of Turkey’s so-called interest rate corridor, and its reduction last month by a quarter of a percentage point was described by the central bank as the first step in a delayed plan to simplify its monetary policy framework. The bank has said that a simpler system will mean a narrower corridor around the middle one-week repo rate.

Further rate cuts may be more difficult due to a potential reversal in the global appetite for risk, Gizem Oztok Altinsac, chief economist at Garanti Securities in Istanbul, said in an e-mailed report before the decision. “A cautious stance rather than rapid rate cuts will be perceived much more positively by the markets, foreign investors at this stage,” she said.

The lira strengthened after the decision and was trading 0.5 percent higher at 2.8161 per dollar at 2:03 p.m. in Istanbul.

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