Turkey’s central bank trims interest rates after nearly two years

Investing.com — Turkey’s central bank has made its first interest rate cut in almost two years, following signs of easing consumer inflation. The bank stated that any future easing steps would be dependent on price data.

The bank’s Monetary Policy Committee, under the leadership of Governor Fatih Karahan, reduced its one-week repo rate to 47.5% from 50% on Thursday. This decision came after an eight-month period of maintaining the rate.

The rate cut was more substantial than the 175-basis-points reduction forecasted in a Bloomberg survey conducted prior to the decision. The monetary authority also reduced the so-called rates corridor from 600 points to 300 points. This move was seen by investors as a hawkish signal. The monetary authority clarified that Thursday’s decision does not imply that rates will continue to be lowered in future meetings.

The central bank stated, “The Committee will make its decisions prudently on a meeting-by-meeting basis with a focus on the inflation outlook.” It also noted a decrease in the underlying trend in inflation during the last month of the year, as well as a slowdown in domestic demand.

Following the decision, the lira’s value remained relatively stable, trading 0.1% lower at 35.2387 per dollar as of 2:15 p.m. in Istanbul. The Borsa Istanbul 100 Index saw an increase of 1% after a brief earlier advance. Meanwhile, the yield on Turkish government bonds retained its earlier declines.

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