Central Banks of Turkey, Ukraine, and Israel Review Monetary Policies

October 22, 2020

Instead of a follow-through measure after last month’s two percentage point rate hike, officials at the Central Bank of Turkey surprised analysts by keeping their one-week repo rate unchanged at 10.25%. Many had been expected the rate to return to its end-2019 level of 12%. The rate initially this year had been slashed by 75 basis points in January, 50 bps in February, 100 bps in both March and April and 50 bps in May. The depreciating lira has driven inflation above its envisaged path, but a released statement talks about contained inflation expectations and persistent pandemic-related uncertainties surrounding global economic prospects.

In April, the Bank of Israel‘s policy interest rate was cut by 15 basis points to an effective bottom of 0.10%. Monetary officials have been relying upon a program of government bond purchases to augment the required accommodative monetary stance and at this months policy review decided to augment that program by 35 billion new Israeli Sheqels, equivalent to about $10.3 billion. This action should ” continue to support financing ability in the economy, in view of the strengthening of the coronavirus crisis and its economic effects,” according to a released statement. 

The key interest rate of the National Bank of Ukraine has been at 6.0% since a 200 basis point cut in June. Three other reductions in the first four months of 2020 had totaled 450 basis points, and altogether that forceful stimulus is expected to lift inflation from 2.3% now to a temporary spate above its 4-6% target range next year, officials are confident that it will subsequently settle into target. Real GDP is projected to contract 6% in 2020 according to the central’s statement.

Copyright 2020, Larry Greenberg. All rights reserved. No secondary distribution without express permission.


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