Turkey’s Central Bank Cuts Policy Interest Rate for the Ninth Time in a Row

Click to read the article in Turkish

The Central Bank of the Republic of Turkey (TCMB) Monetary Policy Committee convened yesterday (May 21) and has reduced the one-week repo auction rate (policy rate) from 8.75 percent to 8.25 percent.

Chaired by Central Bank Chair Murat Uysal, the Monetary Policy Committee has released a statement following their meeting.

"As developments regarding the spread of the coronavirus substantially weaken global growth outlook, central banks in advanced and emerging economies continue to take expansionary measures," the Bank has said and shared the following information and analyses in brief:

'Pandemic closely monitored for global impacts'

"While uncertainties on global economic recovery remain high, normalization steps taken by several countries are being watched.

"The pandemic disease is closely monitored for its evolving global impact on capital flows, financial conditions, international trade and commodity prices.

'Fall in export and tourism revenues'

"While the weakening in economic activity became more pronounced in April, high-frequency indicators for the first half of May display signs of bottoming-out following the steps taken towards partial normalization.

"Despite the fall in exports and tourism revenues due to the pandemic, current account balance is expected to follow a moderate course throughout the year due to the restraining effects of commodity prices and imports.

'Depreciation in lira, rising consumer inflation'

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

"Although consumer inflation might follow a slightly higher course in the short-term due to seasonal and pandemic-related effects on food prices, demand-driven disinflationary effects will be more prevalent in the second half of the year."

Ninth interest rate cut in a row

The Central Bank's recent interest rate cut has marked the ninth 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 meeting on March 17, the policy interest rate was reduced from 10.75 to 9.75 percent.

In the last meeting on April 22, the Bank further decreased the policy interest rate from 9.75 percent to 8.75 percent. (HA/SD)