Central Bank cuts rate
Posted by meb at February 16th, 2008
Turkey’s Central Bank lowered the benchmark interest rate by a quarter point, its sixth consecutive reduction, as the economy grew at the slowest pace in six years and inflation declined.
The Ankara-based Central Bank cut its overnight borrowing rate to 15.25 percent, still the highest in Europe. The bank will release the minutes of the meeting within eight working days. The Turkish economy grew by 1.5 percent in the third quarter, the slowest pace since the 2001 recession, after the Central Bank raised interest rates in mid-2006 to control inflation. The bank’s series of rate cuts since September may end soon in concern that global market turmoil will cause a withdrawal of investors from emerging markets, weakening the lira. “The bank is nearing a pause,” said İnan Demir, an economist at Finansbank. “It will have the chance to start cutting again toward the end of the year, if the global outlook becomes more supportive to emerging markets.” The Central Bank has lowered the rate by 2.25 percentage points since September.
“The uncertainty in the world economy has increased the sensitivity of monetary policy decisions to data,” the bank said explaining Thursday’s rate cut. The timing of future rate cuts will depend on global markets, the government’s fiscal policy and inflation expectations. Turkey’s inflation rate unexpectedly fell to 8.2 percent in January from 8.4 percent in the previous month, still more than double of the year-end target of 4 percent. Inflation will slow in the next few months, though energy and food prices still pose risks, the bank said on Feb. 5. Excluding these, inflation rate is approaching the 4 percent target, the bank said Thursday.
The statistics agency will publish February’s inflation data on March 3.
Source: Bloomberg via Turkish Daily News
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