Turkish Rate Cut of 150 Basis Points Exceeds Forecasts With More To Come

February 19, 2009

The Central Bank of the Republic of Turkey reduced its benchmark lending and deposit rates by 150 basis points each to 14.0% and 11.5%.  This was the fifth straight month with a reduction and brings the cumulative decline to 525 basis points from August-October peaks of 20.25% and 16.25%, respectively.

A statement released by monetary authorities left the door open to continuing rate cuts assuming inflation keeps falling in line with present expectations.  Indeed, such has dropped more sharply than officials had assumed, so in-target readings will be reached more quickly and that significant sub-target inflation will prevail at end-2009.  A near-term end to global recession and financial market strains is considered unlikely, although the outlook is associated with considerable uncertainty.

Copyright 2009 Larry Greenberg.  All rights reserved.  No secondary distribution without express permission.


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