Turkish Central Bank Lowers Policy Rate By 0.25 Points

- Central Bank Monetary Policy Committee (MPC) lowered the policy rate by 0.25 points in line with expectations, while marginal funding rate was lowered by 0.50 points, according to the statement released by the Central Bank on Tuesday.

One-week repo rate, as the Central Bank's policy rate, had been reduced from 7.75 percent to 7.5 percent, while marginal funding rate had been reduced from 11.25 percent to 10.75 percent, the MPC said in the statement.

"The interest rate on borrowing facilities provided for primary dealers via repo transactions has been reduced from 10.75 percent to 10.25 percent, and borrowing rate has been reduced from 7.5 percent to 7.25 percent, late liquidity window interest rates; borrowing rate has been kept at 0 percent, and lending rate has been reduced from 12.75 percent to 12.25 percent."

The ongoing cautious monetary policy along with prudent fiscal and macroprudential policies were having a favorable impact on inflation, especially inflation excluding energy and food and inflation expectations, the MPC said and added:

"The Committee anticipates that the core inflation will continue to decline. Yet, a more persistent reduction in inflation necessitates a cautious approach in monetary policy. Taking into account the elevated volatility in food and energy prices, the Committee decided to cut the interest rates at a measured scale."

Loan growth continued at reasonable levels in response to the tight monetary policy stance and macroprudential measures, with favorable developments in the terms of trade and the moderate course of consumer loans contribute to the improvement in the current account balance.

External demand remained weak, while domestic demand contributed to growth moderately, the MPC assessed that the implementation of the announced structural reforms would contribute to the potential growth significantly and added:

"Future monetary policy decisions will be conditional on the improvements in the inflation outlook. Inflation expectations, pricing behavior and other factors that affect inflation will be monitored closely and the cautious monetary policy stance will be maintained, by keeping a flat yield curve, until there is a significant improvement in the inflation outlook."