ANKARA (dpa-AFX) - Turkey's central bank lowered its key policy rate on Thursday, signaling a start to the easing cycle, after maintaining the key interest rate at a high level since the summer of 2023 amid the elevated inflationary pressures.
The Monetary Policy Committee of the Central Bank of the Republic of Turkey, or CBRT, headed by Governor Yasar Fatih Karahan, decided to cut the policy rate from 50.0 percent to 47.5 percent.
Economists were looking for a 150-basis point rate cut for December. The bank lowered interest rates last in February 2023 that was followed by a series of interest rate hikes.
Policymakers also decided to set the overnight borrowing and lending rates 150 basis points below and above the one-week repo auction rate, thus narrowing the interest rate corridor.
The central bank noticed that the underlying trend in inflation was essentially flat in November, and leading indicators point to a decline in the underlying trend in December.
Recent official data showed that consumer price inflation eased slightly to a 17-month low of 47.09 percent in November from 48.58 percent in October.
'The decisiveness regarding a tight monetary stance is bringing down the underlying trend of monthly inflation and strengthening the disinflation process through moderation in domestic demand, real appreciation in Turkish lira, and improvement in inflation expectations,' the bank said in a statement.
'The tight monetary stance will be maintained until a significant and sustained decline in the underlying trend of monthly inflation is observed and inflation expectations converge to the projected forecast range,' the bank said.
The bank reiterated that the committee will make its decisions prudently on a meeting-by-meeting basis with a focus on the inflation outlook.
ING economist Muhammet Mercan said the addition to forward guidance shows that the cuts will depend on the data but they may not be aggressive and uninterrupted.
Recent developments such as a lower-than-expected 30 percent hike in minimum wage, implying a measured 1ppt additional impact on the headline inflation and eight planned MPC meetings in 2025 versus 12 originally, hints at a higher size of rate cuts per meeting, the economist noted.
Copyright(c) 2024 RTTNews.com. All Rights Reserved
Copyright RTT News/dpa-AFX
© 2024 AFX News
