Central Bank Reduces Policy Interest Rate from 9.75 to 8.75 Percent

* Photo: Anadolu Agency (AA)

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The Central Bank of the Republic of Turkey (TCMB) Monetary Policy Committee convened today (April 22) and has reduced the one-week repo auction rate (policy rate) from 9.75 percent to 8.75 percent.

Chaired by Central Bank Chair Murat Uysal, the Monetary Policy Committee has released a statement after their meeting. Indicating that "the pandemic disease is closely monitored for its global impact," the Bank has noted that the decision in question has been taken in this context.

The Central Bank has announced the interest rate cut briefly as follows:

'Healthy functioning of cash flows is crucial'

"Having displayed a strong upward trend in January and February, thanks to the improvement in financial conditions, economic activity has started to weaken in mid-March due to the effects of the coronavirus pandemic on external trade, tourism and domestic demand.

"In order to contain negative effects of the pandemic on the Turkish economy, it is of crucial importance to ensure the healthy functioning of financial markets, the credit channel and firms' cash flows. In this respect, recent monetary and fiscal measures will contribute to financial stability and post-pandemic recovery by supporting the potential output of the economy.

"Current account balance, which recently recorded significant improvement, is expected to follow a moderate course throughout the year due to the restraining effects of commodity prices and imports.

'Decline in crude oil prices have a favorable impact'

"Developments in inflation expectations, domestic demand conditions and producer prices have contributed to a mild trend in core inflation indicators.

"Despite the recent depreciation in the Turkish lira due to global developments, continued sharp decline in international commodity prices, especially crude oil and metal prices, affects inflation outlook favorably."

Eighth interest rate cut in a row

The Central Bank's recent interest rate cut has marked the eighth interest rate cut in a row. After Central Bank Governor Murat Çetinkaya was removed from office and Murat Uysal was appointed in his place, the Monetary Policy Committee took its first decision of interest rate cut in July and cut the policy rate from its former level of 24 percent to 19.75 percent.

After its meeting on September 12, 2019, the Monetary Policy Committee of the Central Bank lowered the policy rate to 16.50 percent. The Committee reduced the interest rate to 14 percent on October 24, to 12 percent on December 12 and to 11.25 percent on January 16.

On February 19, the Central Bank decreased the policy interest rate from 11.25 percent to 10.75 percent. In the last meeting on March 17, the policy interest rate was reduced from 10.75 to 9.75 percent. (HA/SD)